Record fine of $92.8m for insider trader Raj Rajaratnam
November 9, 2011 at 10:21 am · Close Watch · XFinancial
A federal judge ordered Sri Lankan born Raj Rajaratnam, the Galleon Group hedge fund founder sentenced to 11 years in prison for insider trading, to pay a record $92.8 million penalty in a related Securities and Exchange Commission civil case.
The penalty imposed by U.S. District Judge Jed Rakoff in Manhattan is in addition to the $63.8 million that Rajaratnam’s lawyers said their client has already paid in his criminal case, including $53.8 million that was forfeited and a $10 million fine.
A federal jury in May convicted Rajaratnam of 14 counts of securities fraud and conspiracy in the criminal case.
Rakoff’s colleague, U.S. District Judge Richard Holwell, last month imposed the 11-year prison term, the longest recorded U.S. sentence for insider trading. Rajaratnam is scheduled to begin his term on December 5.
The SEC said Rajaratnam’s civil penalty is the largest against an individual in an insider trading case brought by the regulator, including in its 1980s cases against stock trader Ivan Boesky and junk bond financier Michael Milken.
Rakoff said a severe civil penalty for Rajaratnam was needed to make clear that insider trading should be “a money-losing proposition” for all who consider it.
He also said such a penalty was appropriate because the net worth of Rajaratnam, a former billionaire, “considerably exceeds” the penalties in the criminal case.
“When to this is added the huge and brazen nature of Rajaratnam’s insider trading scheme, which, even by his own estimate, netted tens of millions of dollars and continued for years, this case cries out for the kind of civil penalty that will deprive this defendant of a material part of his fortune,” Rakoff wrote.
(Reuters)