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“In 2008, the fund was worth $7 billion and had recorded an average return of 22.3% until it was closed and assets returned to investors in 2009.” Rajaratnam started his career as a lowly lending officer at Chase Manhattan, later joining Needham & Co. as an analyst. He quickly rose through the ranks from analyst to head of research, finally securing the top job as president. He was then given the latitude to start a hedge fund inside the company.
Raj’s success in managing the initial fund led him to create his own hedge fund company, buying out the initial fund from Needham and renaming it to Galleon. In 2008, the fund was worth $7 billion and had recorded an average return of 22.3% until it was closed and assets returned to investors in 2009. The case against Rajaratnam involved several other individuals including Anil Kumar and Rajat Gupta both of whom tipped him stock takeovers on several occasions. Prosecutors said his illegal trades amounted to at least $60 million in illegal profits and avoided losses. In one example, in 2007, his fund had a short position of 1.5 million shares in Intel, worth $23.5 million, which was quickly reversed to a long position of 1.72 million shares worth $36 million. Prosecutors claimed Rajaratnam was tipped by Rajiv Goel, an Intel insider, that the company was to release better than expected quarterly earnings.
14 | www.financial-spread-betting.com | May 2013
Other cases against Rajaratnam included a tip he supposedly received in 2008 relating to Berkshire Hathaway’s investment of $5 billion in Goldman Sachs. Prosecutors claim Rajaratnam also corrupted more than 16 individuals and used inside information in more than 20 companies over a period spanning several years since the early 90s. The case was one of the biggest ever and ended up with Rajaratnam being sentenced to a record 11 years in prison and to pay fines amounting to $150 million across civil and criminal charges. Nevertheless, he is said to have a net worth of more than $1 billion — enough to cushion him through his remaining years when he gets out of jail...
SAC Capital
Founded: 1992 in Connecticut, USA Industry: Hedge fund Insider Trading: Several former employees were implicated in insider trading Worst Scandal: $276 million in illegal profits trading pharmaceutical companies
Even though SAC Capital is not exactly an individual, we thought we’d include the company here because of the many insider trading scandals that have been coming to light in recent years within the company. SAC Capital was founded by Steven Cohen in 1992 with just $20 million of his own funds. The hedge fund company is well known and grew to manage $14 billion in assets across various different portfolios.