Insider Alert

By Jennifer Johnson on Oct 16, 2009 in Best Practices

A $20 million insider trading scheme run by billionaire Raj Rajaratnam has been halted by federal prosecutors reports Bloomberg. Rajaratnam and five other former Bear Stearns Cos. directors were charged in the scheme.

“The defendents operated in a world of, you scratch my back, I’ll scratch your back,” U.S. Attorney Preet Bharara said at a press conference today. “Greed, sometimes, is not good.”

According to Bloomberg, this is the largest ever hedge fund insider trading case. The latest news can’t be good press for investors given everything the market has had to overcome this year.

The case also marks the first time wiretaps have been used to target insider trading. According to Bharara, the U.S. government will not hesitate to use these tools against Wall Street.

Insider tips came from workers at Intel, IBM, investor relations firms, and McKinsey.

It is estimated that Rajaratnam earned a whopping $17 million to $18 million from the fraud. However, given the fact that he is estimated to have a net worth of $1.3 billion one has to wonder if this fraud was even worth his time.

Blogger and management consultant Peter Cohan also has an excellent blog posting about the arrests. Cohan writes that a former employee who was fired may have turned him Rajaratnam.

About the Author

Jennifer Johnson is a graduate student at the Walter Cronkite School of Journalism and Mass Communications. She is specializing in business journalism and is a graduate assistant at the Donald W. Reynolds National Center for Business Journalism. She has worked as a freelance writer for the St. Louis Business Journal and West Newsmagazine in St. Louis. She spent last year working as a political assistant at the European Union Parliament in Brussels, Belgium.