Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

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Friday, October 16, 2009

SEC Charges Hedge Fund Advisor with Inside Trading

The SEC charged billionaire Raj Rajaratnam and his New York-based hedge fund advisory firm Galleon Management LP with engaging in a massive insider trading scheme that generated more than $25 million in illicit gains. The SEC also charged six others involved in the scheme, including senior executives at IBM, Intel and McKinsey & Company. The SEC’s complaint, filed in federal court in Manhattan, alleges that Rajaratnam tapped into his network of friends and close business associates to obtain insider tips and confidential information about corporate earnings or takeover activity at several companies, including Google, Hilton and Sun Microsystems. He then used the non-public information to illegally trade on behalf of Galleon.

In addition to Rajaratnam and Galleon, the SEC’s complaint charges:

Danielle Chiesi of New York, N.Y. — a portfolio manager at New Castle Funds.
  
Rajiv Goel of Los Altos, Calif. — a managing director at Intel Capital, an Intel subsidiary.
  
Anil Kumar of Saratoga, Calif. — a director at McKinsey & Company.
  
Mark Kurland of Mount Kisco, N.Y. — a Senior Managing Director and General Partner at New Castle.
  
Robert Moffat of Ridgefield, Conn. — a senior vice president at IBM.
  
New Castle Funds LLC — a New York-based hedge fund 

 The complaint seeks a final judgment permanently enjoining the defendants from future violations of the above provisions of the federal securities laws, ordering them to disgorge their ill-gotten gains plus prejudgment interest, and ordering them to pay financial penalties. The complaint also seeks to permanently prohibit Goel, Kumar and Moffat from acting as an officer or director of any registered public company.

http://lawprofessors.typepad.com/securities/2009/10/sec-charges-hedge-fund-advisor-with-inside-trading.html

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