Billionaire Fined $92.8M for Insider Trading

The U.S. Securities and Exchange Commission (SEC) has announced that it has fined billionaire hedge fund manager, Raj Rajaratnam, a record $92.8 million for insider trading. This is the biggest civil monetary penalty ever assessed by the SEC against any individual for insider trading. The historic fine of $92,805,705 was entered by Judge Jed Rakoff in the U.S. District Court for the Southern District of New York. Robert Khuzami, Director of the SEC’s Division of Enforcement, said that “the penalty imposed today reflects the historic proportions of Raj Rajaratnum’s illegal conduct and its impact on the integrity of our markets.”

Rajaratnam was also enjoined in the civil case from future violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Act of 1934 and Exchange Act Rule 10b-5. It is stated in the final order that he remains liable for unspecified amounts of disgorgement and prejudgment interest, which are deemed satisfied by the forfeiture ordered against him in the criminal case. Galleon Management was also enjoined from violating the antifraud provisions of the federal securities laws and holding it jointly and severally liable for the monetary fines and relief ordered against its founder, Raj Rajaratnam.

Interestingly, Judge Rakoff is the judge that refused to approve a $33 million settlement between Bank of America and the SEC, resulting in the two getting together later and reaching a $150 million deal, nearly five times the original settlement. He is also the judge questioning the fairness of the $285 million settlement between Citigroup and the SEC, which is pending awaiting satisfactory responses from Citigroup and the SEC regarding its fairness.

Only a few months ago, Rajaratnum was tried and found guilty on five counts of conspiracy to commit securities fraud and nine counts of securities fraud, in the criminal portion of the case. The final result in that case was a sentence of 11 years in prison and a criminal fine of $10 million, in addition to an order to repay over $53.8 million in illegal profits he made. Combining the criminal and civil cases, Rajaratnam was assessed and ordered to pay fines of nearly $157 million.

These cases began originally when Rajaratnam and his firm, Galleon Management LP, were named in a huge insider trading probe that involved some 29 individuals, firms and over 15 publicly traded companies generating over $90 million in illegal gains or avoided losses.

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