Raj Rajaratnam, billionaire founder of technology-focused hedge fund Galleon Group, was among six people charged today in a $20-million insider-trading scheme, according to a Bloomberg report.
Among the others arrested were Rajiv Goel, a director of strategic investments at Intel Capital; Anil Kumar, a director at McKinsey & Co.; and IBM Corp. executive Robert Moffat.
Many of the illicit trades were said to involve information-technology companies, including Akamai Technologies Inc., Advanced Micro Devices (AMD) , Polycom, Clearwire, Google, IBM, Sun Microsystems.
Prosecutors called it the largest-ever insider-trading case involving a hedge fund. U.S. Attorney Preet Bharara told a Manhattan press conference it was the first time wiretaps have been used to target insider trading, signaling the government will now use the same tools against Wall Street that it employs in organized crime and drug cases.
It’s long overdue, as far as I’m concerned. Incidents such as this one confirm that public markets have become rigged games where those with advance inside knowledge of material corporate events conspire to enrich themselves at the expense of those who lack access to such information. As trades involve buyers and sellers, those buying or selling with inside information are perpetrating grand larceny.
For a long time now, I have said that the racetracks of Santa Anita and Goodwood offer a better chance of an honest outcome than the public markets of New York and London. Greed is rampant on Wall Street, and it too often runs riot in the boardrooms of the information-technology industry.
Ask yourself: How often have you observed a technology stock whose shares have moved up or down sharply and unaccountably, well in advance of meaningful news? Sadly, it happens all the bloody time.
These individuals deserve their day in court, and it isn’t my place to pass judgment on them. That said, the wiretap evidence cited today appears damning. If they are guilty, I hope they are sent up the river for a good long time.
The integrity of the public markets depends upon the markets being honest and transparent. Justice must be done, and it must be seen to be done.