Hedge Fund Titan Raj Rajaratnam Arrested For Fraud
Galleon Group founder and billionaire Raj Rajaratnam was arrested by federal agents this morning and charged by the U.S. Attorney with crimes including securities fraud and conspiracy over alleged insider trading, reports CNBC this morning. The Wall Street Journal reports that Mr. Rajaratnam has been charged with four counts of conspiracy and eight counts of securities fraud.
The hedge funds named in the case are New Castle, Galleon Technology, and Intel Capital. Others charged criminally in the case include Rajiv Goel, director in strategic investments at Intel Corp.'s investment arm; Anil Kumar, a director at global management-consulting firm McKinsey & Co.; Danielle Chiesi and Mark Kurland of New Castle Partners LLC, the one-time equity hedge-fund group at Bear Stearns Asset Management Inc.; and Robert Moffat, a senior vice president at International Business Machines Corp. (NYSE: IBM).
The insider trading case is said to be for about $20 million, and involved the stocks of International Business Machines (NYSE: IBM), Advanced Micro Devices (NYSE: AMD), and Sun Microsystems (NYSE: SUN). Other companies included Google (Nasdaq: GOOG), Polycom (Nasdaq: PLCM), and Hilton Hotels.
A joint press conference between the U.S. Attorneys office, the SEC, and the FBI will be held at 1pm ET today.
Mr. Rajaratnam's net worth was estimated to be about $1.3 billion by Forbes.
Below are some details of the alleged fraud:
An unnamed source, identified in the SEC’s complaint as Tipper A, obtained inside information about earnings announcements at Polycom (NASDAQ: PLCM) and Google (NASDAQ: GOOG), as well as a takeover announcement of Hilton. Tipper A then allegedly provided this information to Rajaratnam, who used it to trade on behalf of Galleon.
Goel provided inside information to Rajaratnam about certain Intel (NASDAQ: INTC) quarterly earnings and a pending joint venture concerning Clearwire Corp., in which Intel had invested. Rajaratnam then used this information to trade on behalf of Galleon. As payback for Goel’s tips, Rajaratnam, or someone acting on his behalf, executed trades in Goel’s personal brokerage account based on inside information concerning Hilton and PeopleSupport, which resulted in nearly $250,000 in illicit profits for Goel.
Kumar obtained inside information about pending transactions involving AMD (NYSE: AMD) and two Abu Dhabi-based sovereign entities, which he shared with Rajaratnam. Rajaratnam then traded on the basis of this information on behalf of Galleon.
Chiesi obtained inside information from an executive at Akamai Technologies and traded on the information on behalf of a New Castle fund, netting a profit of approximately $2.4 million. Chiesi also passed on the inside information to Rajaratnam, who then traded on behalf of Galleon.
The SEC also alleges that IBM Senior Vice President Robert Moffat provided inside information to Chiesi about Sun Microsystems (NASDAQ: JAVA). Moffat obtained the information when IBM was contemplating acquiring Sun. Chiesi then allegedly traded on the basis of this information on behalf of New Castle, making approximately $1 million in profits.
The hedge funds named in the case are New Castle, Galleon Technology, and Intel Capital. Others charged criminally in the case include Rajiv Goel, director in strategic investments at Intel Corp.'s investment arm; Anil Kumar, a director at global management-consulting firm McKinsey & Co.; Danielle Chiesi and Mark Kurland of New Castle Partners LLC, the one-time equity hedge-fund group at Bear Stearns Asset Management Inc.; and Robert Moffat, a senior vice president at International Business Machines Corp. (NYSE: IBM).
The insider trading case is said to be for about $20 million, and involved the stocks of International Business Machines (NYSE: IBM), Advanced Micro Devices (NYSE: AMD), and Sun Microsystems (NYSE: SUN). Other companies included Google (Nasdaq: GOOG), Polycom (Nasdaq: PLCM), and Hilton Hotels.
A joint press conference between the U.S. Attorneys office, the SEC, and the FBI will be held at 1pm ET today.
Mr. Rajaratnam's net worth was estimated to be about $1.3 billion by Forbes.
Below are some details of the alleged fraud:
An unnamed source, identified in the SEC’s complaint as Tipper A, obtained inside information about earnings announcements at Polycom (NASDAQ: PLCM) and Google (NASDAQ: GOOG), as well as a takeover announcement of Hilton. Tipper A then allegedly provided this information to Rajaratnam, who used it to trade on behalf of Galleon.
Goel provided inside information to Rajaratnam about certain Intel (NASDAQ: INTC) quarterly earnings and a pending joint venture concerning Clearwire Corp., in which Intel had invested. Rajaratnam then used this information to trade on behalf of Galleon. As payback for Goel’s tips, Rajaratnam, or someone acting on his behalf, executed trades in Goel’s personal brokerage account based on inside information concerning Hilton and PeopleSupport, which resulted in nearly $250,000 in illicit profits for Goel.
Kumar obtained inside information about pending transactions involving AMD (NYSE: AMD) and two Abu Dhabi-based sovereign entities, which he shared with Rajaratnam. Rajaratnam then traded on the basis of this information on behalf of Galleon.
Chiesi obtained inside information from an executive at Akamai Technologies and traded on the information on behalf of a New Castle fund, netting a profit of approximately $2.4 million. Chiesi also passed on the inside information to Rajaratnam, who then traded on behalf of Galleon.
The SEC also alleges that IBM Senior Vice President Robert Moffat provided inside information to Chiesi about Sun Microsystems (NASDAQ: JAVA). Moffat obtained the information when IBM was contemplating acquiring Sun. Chiesi then allegedly traded on the basis of this information on behalf of New Castle, making approximately $1 million in profits.
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