About a month and a half ago, the billionaire hedge fund manager Raj Rajaratnam was convicted of insider trading.It was great news for Wall Street and hedge fund managers because it reaffirmed trust in the industry (whether or not it’s deserved). Bloomberg Markets Magazine quoted big time hedge fund manager Lee Ainslie saying that his worst nightmare would have been Raj going free.
For a quick background, read this.
Here are the new details:
- Raj flew a group of people on his private plane to the Superbowl every year for a weekend of partying
- The investigation into Galleon began with a letter that was sent to the SEC. It read:
“It is hedge funds like Galleon Group that create wealth for their shareholders and themselves at the expense of innocent investors… Insider trading word in this fund should be changed to insider partnership and prostitution… Prostitution is rampant for executives visiting Galleon. You will find that the Super Bowl parties for the executives, paid for by Galleon Group, include prostitutes and other forms of illegal entertainment. In return, the executives provide Galleon the unfair edge that the fund leverages so well. The letter was signed, Seeking integrity in business.
Also fascinating: what happened when they all got caught.
Raj, Kumar, and Danielle Chiesi were all arrested on the same day.
- Raj was arrested at his apartment at Sutton Place, then released on $100 million bond. “Within hours, Adam Smith and Rengan Rajaratnam had removed evidence from the Galleon offices.”
- Kumar fainted when the cops put handcuffs on him. “He fainted, hitting his head against a wall. He had to be treated at a local hospital before he could be brought in for booking.”
- Chiesi woke up to four agents wearing bulletproof vests knocking on her door at 6 AM. “The agents spent an hour showing Chiesi a file of evidence before concluding that she wouldn’t coöperate. She refused to place a monitored call to someone on the West Coast—probably Hector Ruiz.”
Later the same day, Raj’s wife, Asha Rajaratnam, sent a text message to Kumar’s wife, Malvika: “I’m sorry.”
After reading this article, Raj will be slapping his hand on his forehead about one thing he did. Prosecutors called him in first years before he was actually caught. They were suspicious about texts he sent to roomy81, but they didn’t have much to go on.
So they asked Raj if he knew who the IM name “roomy81” belonged to, being careful to construct the question so that it wouldn’t tip him off. “Roomy Khan,” he said. He gave them her name, and their investigation took off from there.
It led them to a IM conversation cited many times in the case, and an IM from Khan that said, “do not buy plcm till i het guidance.”
Without that IM, says the article, the case would have died.
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