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    Hedge Fund Insider Trading

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    Toral Shah
    Raj Rajaratnam was born in Sri Lanka and received an MBA from Wharton. He started his career at Chase Manhattan Bank and later founded the hedge fund Galleon Group. The document discusses what a hedge fund is and laws requiring investors to be accredited. It describes tipping as providing non-public company information illegally. The FBI used wiretaps during its investigation of Raj Rajaratnam for insider trading, which presented issues around privacy and proving criminal acts. Rajaratnam was ultimately convicted and sentenced to 11 years in prison along with paying large fines.

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    Hedge Fund Insider Trading

    Uploaded by

    Toral Shah
    186 views15 pages
    Raj Rajaratnam was born in Sri Lanka and received an MBA from Wharton. He started his career at Chase Manhattan Bank and later founded the hedge fund Galleon Group. The document discusses what a hedge fund is and laws requiring investors to be accredited. It describes tipping as providing non-public company information illegally. The FBI used wiretaps during its investigation of Raj Rajaratnam for insider trading, which presented issues around privacy and proving criminal acts. Rajaratnam was ultimately convicted and sentenced to 11 years in prison along with paying large fines.

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    Raj Rajaratnam was born in Sri Lanka and received an MBA from Wharton. He started his career at Chase Manhattan Bank and later founded the hedge fund Galleon Group. The document discusses what a hedge fund is and laws requiring investors to be accredited. It describes tipping as providing non-public company information illegally. The FBI used wiretaps during its investigation of Raj Rajaratnam for insider trading, which presented issues around privacy and proving criminal acts. Rajaratnam was ultimately convicted and sentenced to 11 years in prison along with paying large fines.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    186 views15 pages

    Hedge Fund Insider Trading

    Uploaded by

    Toral Shah
    Raj Rajaratnam was born in Sri Lanka and received an MBA from Wharton. He started his career at Chase Manhattan Bank and later founded the hedge fund Galleon Group. The document discusses what a hedge fund is and laws requiring investors to be accredited. It describes tipping as providing non-public company information illegally. The FBI used wiretaps during its investigation of Raj Rajaratnam for insider trading, which presented issues around privacy and proving criminal acts. Rajaratnam was ultimately convicted and sentenced to 11 years in prison along with paying large fines.

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    Hedge Fund Insider Trading

    About Raj Rajratnam


    Born in Colombo. Moved to England to study engineering at University of Sussex. MBA from Wharton School of the University of Pennsylvania. Started his career as a lending officer at the Chase Manhattan Bank a in 1983.

    About Raj Rajratnam


    Joined the investment banking company Needham & Co. in 1985 and became the president of the company in 1991 at the age of just 34. He started a hedge fund as Galleon. 400 richest American for 2008 and 2009. The richest born Srilankan in 2009.

    What is a hedge fund?


    Making an investment to reduce the risk of adverse price movements in an asset. An example of a hedge would be if you owned a stock, then sold a futures contract stating that you will sell your stock at a set price, therefore avoiding market fluctuations. Investors use this strategy when they are unsure of what the market will do.
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    What is a hedge fund?


    Open to a limited number of investors and require a very large initial minimum investment. Locking period. Cater to sophisticated investors.

    Laws for Hedge Fund


    In the U.S., laws require that the majority of investors in the fund be accredited. That is, they must earn a minimum amount of money annually and have a net worth of more than $1 million, along with a significant amount of investment knowledge.

    Tipping
    The act of providing material non-public information about a publicly-traded company to a person who is not authorized to have the information. This is an illegal act. Information is considered non-public until it has been publicly released and the financial markets have had sufficient time to digest the impact the information may have had on prices.

    Wiretapping
    A concealed listening or recording device connected to a communications circuit. The act of installing such a device. Audio and video recordings.

    What are they used for?


    Historically, law enforcement has used wiretaps primarily to aid in the investigation of narcotics and drugs. Trafficking and organized crime. Tracking terrorists. Hedge-fund managers wondered whether even legitimate exchanges caught on tape would draw scrutiny.
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    Conversation tapped
    "I got a call at 3:58, right?" Rajaratnam said, referring to the September 23 conversation with Gupta about a Goldman board meeting that day. "Saying something good might happen to Goldman, right? Wiretap evidence obtained from the mobile phone of convicted Raj Rajaratnam. Six different judges authorized the wiretaps .
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    Why wiretapping?
    Because they are particularly appropriate in investigating insider trading. Because it requires communication and is often difficult to detect and prove beyond a reasonable doubt.

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    Problem with wiretapping


    Invasion of privacy On Nov. 16, 2007, federal agents tapped the phone of former Galleon Group trader Craig Drimal Mistakenly tapped and recorded dozens of calls from the cell phone of a Cingular Wireless technician in Boston who had nothing to do with the FBI's insider-trading probe. Tapped roughly 80 phone conversations over five days.

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    Problem with wiretapping


    Need to be cross-examined in order for the trial process to be fair. Allowing full cross-examination might reveal how the intelligence is gathered and the scale of monitoring operations.

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    Problem with wiretapping


    Serious problems with the quality of intercept evidence. It is good at showing links between people, it is bad at proving that they are actually doing anything. Wiretaps are expensive.

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    Present Scenario
    Mr. Rajaratnam must pay a $92.8 million fine. Sentenced to 11 years in prison and pay a $63.8 million criminal fine.

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