Galleon Group founder Raj Rajaratnam and five others were charged with engaging in the largest ever hedge fund insider-trading scheme, generating profits of more than $20 million over several years, U.S. prosecutors, the FBI and the SEC said Friday.
Insider trading by hedge funds Galleon and New Castle and Intel's Intel Capital unit took place in shares of Hilton Hotels Corp, Google Inc, IBM, Advanced Micro Devices Inc and other stocks, according to two complaints filed in U.S. District Court in New York.
All six accused have been arrested, a spokeswoman for the federal prosecutor's office in Manhattan said. The case could represent an important development in the government's enforcement of securities laws, she said.
This is not a garden-variety insider trading case, U.S. Attorney Preet Bharara told a news conference. Beyond the scale of the scheme, It shows that we are targeting white-collar insider trading rings with the same powerful investigative techniques that have worked so successfully against the mob and drug cartels.
He also fired a warning shot for the rest of Wall Street.
Today, tomorrow, next week, the week after, privileged Wall Street insiders who are considering breaking the law will have to ask themselves one important question: Is law enforcement listening? he said.
Securities fraud charges carry possible maximum prison sentences of up to 20 years.
SRI LANKA TITAN
One of the criminal complaints accuses Rajaratnam, considered the richest Sri Lankan in the world, of conspiring with Intel employee Rajiv Goel and Anil Kumar, a director of powerful management consulting firm McKinsey & Co. The alleged offenses took place for about three years starting in January 2006.
Galleon had as much as $7 billion under management, the complaint said. Intel Capital is the investment arm of Intel Corp. Officials from Galleon did not return calls seeking comment.
Rajaratnam, born into a family of well-to-do Tamils in the Sri Lankan capital Colombo, is one of the largest investors on the Colombo Stock Exchange.
(Reporting by Grant McCool and Joseph Giannone; Additional reporting by Edith Honan, Walden Siew and Ritsuko Ando in New York, Clare Baldwin in San Francisco, and Bryson Hull in Colombo, Sri Lanka; editing by Gerald E. McCormick, Phil Berlowitz and John Wallace)