Comments on: How insider trading becomes endemic A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 By: Danny_Black Sat, 25 Jun 2011 15:23:33 +0000 ah, PragCap, the website written by a guy who thinks 2 and 20 is the investment banking model….

Thank god no one needs to bother with facts anymore.

By: hsvkitty Sat, 25 Jun 2011 02:57:08 +0000 @Danny Black, your prejudice as a former banker tends to shine even brighter than mine. Having read what his colleagues have said of him, the culture of dirty money is exactly what floated Raj’s boat. For some, the need for greed is a raison d’etre. trading-on-insider-information

From the article’s “Seeking integrity in business;”

“In March, 2007, the S.E.C. briefed the F.B.I. and the United States Attorney’s Office for the Southern District of New York, which opened a criminal case. That same month, an anonymous letter arrived at the S.E.C.’s offices, postmarked Queens, March 13, 2007.

“It is hedge funds like Galleon Group that create wealth for their shareholders and themselves at the expense of innocent investors,” the letter began. “Insider trading word in this fund should be changed to insider partnership and prostitution. . . . Prostitution is rampant for executives visiting Galleon. You will find that the Super Bowl parties for the executives, paid for by Galleon Group, include prostitutes and other forms of illegal entertainment.

In return, the executives provide Galleon the unfair edge that the fund leverages so well.” The letter was signed “Seeking integrity in business.” The writer sounded knowledgeable about Galleon and the industry, but it was impossible to track him down.

By: PDCWilliams Fri, 24 Jun 2011 15:32:42 +0000 Felix, I know someone that is closely related to this story and would love to tell someone his side of the story. If you are interested let me know at



By: Danny_Black Fri, 24 Jun 2011 13:49:06 +0000 JimInMissoula, actually the prosecution claimed up to 60 million so it is an upper bound during the time of investigation during which his funds make 1.5bn profit in just one of the years. Given the amount of time and effort that the prosecution put into this is safe to bet the vast majority of his earnings that year were legal.

TinyTim1, and for all we know Steve Jobs has a deal with Colgate that makes people who brush their teeth need to buy overpriced tat.

Ok engage BOTH brain cells. Public companies do not have a load of receipts pile up in the corner and then let the accountants lose on it at the end of every quarter. Nor during the time they are collating their figures do the IR teams go on holiday. I assume you think it is just a coincidence that the consensus figures for those companies come in so close to the actual figures and IR tell that to anyone. Yes if by public you mean people too lazy to do anything except look at CNBC but anyone who is a even vaguely serious investor is massaged by a team of people who job it is to make sure nobody is surprised.

By: JimInMissoula Thu, 23 Jun 2011 19:42:10 +0000 The $60 million figure is just what the prosecution could build a case on over the period of investigation. It’s very unlikely that it reflects the full scope of the misdeeds at Galleon.

By: Greenspan2 Thu, 23 Jun 2011 16:02:32 +0000 Raj probably deserves his punishment, but the faces of the few public scapegoats tossed to the masses in an attempt to placate them are ones easy to chew on but not necessarily the most deserving ones.

By: TinyTim1 Thu, 23 Jun 2011 15:58:42 +0000 @Danny

“You can be sure it is as much a surprise to the CFO and CEO as it is to the investors.”

I am not sure you mean to be this silly. You are in effect denying that inside information exists AT ALL which is clearly NOT the case.

Companies announce their quarterly figures around a month or so AFTER the end of the Q.
For a little while the numbers will be crunched but then the CEO and CFO (and other insiders) will know them.


This is sometimes known as quiet period or black out period. The insiders are prevented in that period from trading stock.

It is at exactly this time that the stock is vulnerable to insider trading. If someone knew RIMM’s numbers were a miss the week before the results were released (and you can be sure the CEO and CFO knew) they could have made a killing.

As for your claim that Raj would have made more money in T-Bills you are missing the point.

For all we know, Raj could have built his entire business on the back of insider trading.
His fantastic returns were only so good because he had insider knowledge.
So, his AUMs were much higher than they would have been if he were relying on non-insider research.
AUMs = better.
Performance = better.
On 2 and 20 that is a whole BUNCH more money for the big man.

By: Isaac_R Thu, 23 Jun 2011 09:01:32 +0000 Well said Danny

By: Danny_Black Thu, 23 Jun 2011 07:04:25 +0000 hswkitty, numbers don’t back you up. The amount of money made in this insider trading scheme is tiny relative to the guys own wealth, even if we assume every single penny went directly in his pocket that is 3% over a number of years. He could have bought T-Bills and done better.

A couple of seconds thought shows it can’t be “endemic”. Companies have whole teams of people whose job it is to massage the figures exactly so investors are not surprised and when there is a shock, usually it is news to the executives just as much as to the outside world. Secondly, the amount of information that is truly market moving is small relative to the market. What percentage of the market is M&A activity? Lets assume you knew every single merger that was going to happen in advance, thats still a tiny percentage of the market. Company misses its quarterly figures? You can be sure it is as much a surprise to the CFO and CEO as it is to the investors.

David4321, rings true because it panders to your prejudices.

By: hsvkitty Thu, 23 Jun 2011 00:13:00 +0000 @Danny Black … Seriously?

For people like Rajaratnam, insider trading and corruption are what MAKES their riches and makes them who they are and wish to be. They have already risked everything to achieve their status the dirty way …

It is a culture that draws like minds. The culture is huge, it is the number who are caught that is small. The only reason why so few are prosecuted is it is difficult to prove. Do you really think Rajaratnam only made the dirty money that was proven? C’mon Danny!

One of the reasons why this is so, is that they use the “everyone is doing it” excuse to recruit and as Felix so aptly put it, once they are tainted, they are much more reluctant to give up their partners in crime and apt to continue and foster the culture of like minds.

The majority of traders may be pretty honest, but insider trading is rampant. There are a lot of immoral people who are in it for the gains at all costs … even a few years in a compound with horrors such as restricted cable TV access is not going to stop them.

I am questioning why you are adamantly in denial that insider trading is rampant. The number of people caught and tried remains small, but that has more to do with corrupted collusion providing less whistle-blowers, the cost of and perhaps even some lack of incentive to catch many, as there is less confidence in an obviously rigged market.

David4321, the banksters get off scotfree and the man who steals some meat to feed his family gets 2 years. Why? Greed creates a culture where money gives prestige, power and Teflon-like slipperiness to those who have it, however ill gotten.