Lots More Insider Trading Cases Coming After Rajaratnam Arrest

This is why hedge funds starting freaking the out after Galleon co-founder Raj Rajaratnam was busted on Friday.

Bloomberg: Federal investigators are gearing up to file charges against a wider array of insider-trading networks, some linked to the criminal case against billionaire hedge-fund manager Raj Rajaratnam that shook Wall Street last week, people familiar with the matter said.

The pending crackdown, based on at least two years of investigation, targets securities professionals including hedge- fund managers, lawyers and other Wall Street players, the people said, declining to be identified because the cases aren’t public. Some probes, like the one that focused on Rajaratnam, rely on wiretaps. Others stem from a secret Securities and Exchange Commission data-mining project set up to pinpoint clusters of people who make similar well-timed stock investments.

If officials want to go to war against hedge funds and shrink the industry, this is a much more effective way to do it than through regulations or registration, since this will have a chilling, paranoia-inducing effect, and change the way many companies do business.

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