SEC Vs Galleon Insider Trading Continues: 4 More Busted

Jack Humphrey, Regulatory journalist
January 11, 2011 /

New York-based hedge fund advisory firm Trivium Capital Management is the latest sued by the Securities and Exchange Commission (SEC) in an insider trading that involved the Galleon hedge fund complex operated by Raj Rajaratnam with other professional traders in the securities of 14 companies.

The latest in a string of lawsuits filed by the SEC on January 10 in a Manhattan federal court has implicated Trivium’s hedge fund manager Robert Feinblatt and analyst Jeffrey Yokuty in an insider trading that generated at least $15 million from an inside information regarding Google Inc.’s 2007 second quarter earnings leaked by Shammara Hussain, an investor relations personnel at Market Street Partners, a consulting firm.

Roomy Khan, an individual investor who has been receiving leaked inside information from several sources, allegedly engaged in an insider trading with Sunil Bhalla, a senior corporate executive, who provided inside information about Polycom’s quarter earnings in 2005 and 2006. Khan relayed this information to Rajaratnam who then traded on Galleon’s behalf and to Feinblatt and Yokuty who also traded on Trivium’s behalf based on the information leaked.

In addition, Khan also engaged in another insider trading with an analyst at a Moody’s rating agency that provided information about the impending takeover of Hilton by The Blackstone Group and another impending acquisition of Kronos by Hellman & Friedman, the complaint said. These pieces of information were then forwarded to Feinblatt and Yokuty among others who traded on their company’s behalf based on the provided information.

The four defendants, Feinblatt, Yokuty, Bhalla, and Hussain will disgorge their ill-gotten profits from the insider trading scheme plus prejudgment interest and financial fines. The SEC will also bar Bhalla from serving any official or directorial post in any public company.

The initial complaint was filed on October 16, 2009 alleging that Galleon Management LP generated ill-gotten profits of at least $25 million from an insider trading that implicated several other firms such as New Castle Funds, Intel Capital and a subsidiary, Mckinsey & Company, and IBM.

On November 5, 2009, 13 additional individuals and entities, including three hedge fund managers, three professional traders at New York-based Schottenfeld Group, and a senior executive at Atheros Communications, a California-based developer of networking technologies, were added to the list of defendants in the Galleon insider trading case.

Overall, the SEC has already busted insider trading scheme of 27 individuals that has generated an estimated total of $69 million in illegal gains.

 

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