Where Rajaratnam Got His Tips on Complex Hedge Funds Inside Information: SEC Reveals

Jack Humphrey, Regulatory journalist
March 01, 2011 /

The long-running case against hedge fund manager Raj Rajaratnam who bears compounding charges over trading of inside information with several hedge funds like the Goldman Sachs may be given light with the SEC’s findings of who tipped him with these pieces of information.

The Securities and Exchange Commission alleged in a lawsuit today that former Goldman Sachs board member and business consultant Rajat Gupta has been tipping Rajaratnam with several inside information of the hedge funds that are subject of the scheme.

On January 11, the SEC added to the list of fraudsters in Rajaratnam’s hedge funds complex four more names who were tagged in the insider trading, which included Trivium’s hedge fund manager Robert Feinblatt and analyst Jeffrey Yokuty.

Their fraudulent scheme generated at least $15 million from an inside information of Google Inc.’s 2007 second quarter earnings leaked by Shammara Hussain, an investor relations personnel at consulting firm Market Street Partners.

In the recent development of the SEC’s probe into this network, Gupta was accused of providing Rajaratnam with inside information of the hedge funds through several board calls and other instances when he was still a member of Goldman Sachs board of directors.

The insider trading that occurred in many instances included the impending $5 billion investment by Berkshire Hathaway in Goldman Sachs, which was illegally disclosed to Rajaratnam prior to its announcement in September 2008. This insider trading scheme of hedge funds information had generated more than $900,000 in illicit profits.

On the other hand, Rajaratnam had also generated illegal profits of more than $18 million from the Goldman inside information which he used to trade on behalf of his hedge funds.

 

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