Billionaire among 6 nabbed in inside trading case

Wall Street wake-up call: Hedge fund boss, 5 others charged in $25M-plus insider trading case

• By Larry Neumeister and Candice Choi, Associated Press Writers
• On 7:35 pm EDT, Friday October 16, 2009
  

NEW YORK (AP) -- One of America's wealthiest men was among six hedge fund managers and corporate executives arrested Friday in a hedge fund insider trading case that authorities say generated more than $25 million in illegal profits and was a wake-up call for Wall Street.

AP - Raj Rajaratnam, billionaire founder of the Galleon Group, a major hedge fund, is led in handcuffs from FBI ...

SymbolPriceChangeGOOG549.85+19.94

IBM121.64-6.34

INTC20.18-0.49

Raj Rajaratnam, a portfolio manager for Galleon Group, a hedge fund with up to $7 billion in assets under management, was accused of conspiring with others to use insider information to trade securities in several publicly traded companies, including Google Inc.

U.S. Magistrate Judge Douglas F. Eaton set bail at $100 million to be secured by $20 million in collateral despite a request by prosecutors to deny bail. He also ordered Rajaratnam, who has both U.S. and Sri Lankan citizenship, to stay within 110 miles of New York City.

U.S. Attorney Preet Bharara told a news conference it was the largest hedge fund case ever prosecuted and marked the first use of court-authorized wiretaps to capture conversations by suspects in an insider trading case.

He said the case should cause financial professionals considering insider trades in the future to wonder whether law enforcement is listening.

"Greed is not good," Bharara said. "This case should be a wake-up call for Wall Street."

Joseph Demarest Jr., the head of the New York FBI office, said it was clear that "the $20 million in illicit profits come at the expense of the average public investor."

The Securities and Exchange Commission, which brought separate civil charges, said the scheme generated more than $25 million in illegal profits.

Robert Khuzami, director of enforcement at the SEC, said the charges show Rajaratnam's "secret of success was not genius trading strategies."

"He is not the master of the universe. He is a master of the Rolodex," Khuzami said.

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When the market crashed this past fall, just about one year ago is when the free fall began, I knew from my days as a financial advisor with UBS Financial Services that hedge funds and selling long/short were going to be the death of our economy.  All REIT's (Real Estate Investment Trusts), which at one time was thought to be among the most sound investments you could make, were going to kill a lot of ordinary folks retirement plans.  Most all asset allocations had/have REIT's as a part of it.  Some far more than needed.

I'm not surprised at today's news that one of America's billionaire fund managers has been brought down.  What will surprise me is if he's the last.  These guys have a license to print fake money on paper.  Not new money, Bernie Madoff type money.  The kind that is an illusion.  The layers of these Wall Street scams are going to be peeled away and exposed if Washington and our federal government really, and I do mean really want change.

People can't blame the SEC (Securities and Exchange Commision) because they are the equivalent of the Mayberry Sheriff's Department trying to run homeland security.  Yes, they are that out numbered.  The SEC is a running joke in wirehouses and brokerages houses.  I'm going to assume that Mr. Madoff and Mr. Rajaratnam aren't laughing anymore.  This is two huge scandals brought down under Obama. Did I just give Obama some credit for this happening?  Hell yes I did and you know why?  I'm giving him credit because he gets blamed for every bad thing that occurs.  So let's call it quid pro quo from here on out.

Of course President Obama really didn't have a hands on thing to do with this guy getting caught, but he has got some people in place and investigating these greedy bastards and not just taking money under the table (like days past) to make it disappear.  This guy is going to do hard Madoff-like time.  Maybe his work wasn't as blatantly fraudulent as Madoff, but by the law it was every bit as risky and illegal.

So here you go right wingers, if Obama is going to be blamed for everything from receiving the Nobel Peace Prize to global climate change (which I know doesn't exist in your eyes), he's going to get some damn credit from me for at least putting a little fear in these criminal's hearts.  I would say about now the rats are scurrying, and Geneva is a very busy city tonight.