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, US prosecutors, the FBI and the SEC have said.
Insider trading by hedge funds Galleon and New Castle and Intel’s Intel Capital unit took place in shares of Hilton Hotels, Google, IBM, Advanced Micro Devices and other stocks, according to two complaints filed in US 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.
Securities fraud charges carry possible maximum prison sentences of up to 20 years.
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 consulting firm McKinsey & Co. The alleged offences 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.
“This is not a garden-variety insider trading case," US Attorney Preet Bharara told a news conference. “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.”
“Wall Street insiders who are considering breaking the law will have to ask themselves one important question: Is law enforcement listening?” he said.