Seven hedge fund managers and executives were arrested yesterday in connection with an insider trading case investigated by the Securities and Exchange Commission (SEC), the U.S. Attorney’s Office, and the Federal Bureau of Investigation (FBI). Among those arrested was heavyweight portfolio manager Raj Rajaratnam of the Galleon Group. He and the others are charged with conspiring to use insider information to trade securities in several publicly traded companies, among them Google Inc. Authorities say that because of their actions, these arrested individuals generated upwards of $25 million in illegal profits.
This case is the first where authorities used court-authorized wiretaps to capture conversations in connection to an insider trading case. Officials see this as a game changer in an unapologetically secretive industry.
The SEC’s complaint charges the defendants with violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, the laws which, in essence, bar insider trading and similar activities. The others charged in connection with this investigation are as follows:
• 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