Billionaire Busted for Insider Trading

Raj Rajaratnam is a billionaire who manages a hedge fund called Galleon. He and five others have been charged with insider trading, and from the looks of things, there are tape recordings of the group conspiring to break securities laws. The SEC claims their shenanigans netted them around $25 million. One would think that a billionaire would have more brains than to run the risk of jail time for such a sum. Of course, greed is a leading cause of stupidity.

The SEC is making this a warning to other funds. "It would be wise for investment advisors and corporate executives to closely look at today's case, their own internal operations, and the increasing focus and scrutiny on hedge fund trading by the SEC and others," said Robert Khuzami, director of the SEC's enforcement division. They should, "consider what lessons can be learned and applied to their own operations."

Actually, the Galleon case isn't about internal operations as such. It appears the accused knew they were breaking the law and did it anyway. There really isn't much to be learned from this case except that the SEC is paying closer attention than before to this sort of thing. co-defendant Mark Kurland, a senior managing director and general partner at New Castle, warned Danielle Chiesi, a portfolio manager at New Castle Funds in a taped phone call, "Don't put anything on email... Don't even email Raj [Rajaratnam], or anybody... Be careful." For her part, Ms Chiesi said, "I'm dead if this leaks. I really am and my career is over. I'll be like Martha fucking Stewart." In fact, she'll be much worse off.

According to Forbes, Mr. Rajaratnam is worth $1.3 billion and is the 559th richest person in the world. Whether he got that way honestly is open to debate, but what is not debatable is that he had more money than he could ever spend, and he appears to have engaged in illegal activity to get more. The man clearly doesn't know enough to quit when he's ahead.

According to David Glovin, David Scheer and Bob Van Voris over at Bloomberg, "Rajaratnam, 52, faces 13 fraud and conspiracy counts, many of which carry 20-year maximum sentences. Under federal sentencing guidelines, he faces 10 years in prison if convicted at trial, Assistant US Attorney Josh Klein said in court yesterday." This idiot might spend the rest of his life separated from his vast wealth because he wanted another $25 million. This is the biggest insider trading bust since the 1980s, and it was allegedly committed by a man who didn't need the cash. It's clearly a case of a fool and his money being parted.

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