Part II: Billionaire, Founder of Galleon Group, Charged With Insider Trading

Raj Rajaratnam, the billionaire founder of the Galleon Group that I wrote about in my last post has also been charged by the SEC in Federal court. The SEC claims Rajaratnam's scheme was massive (as illustrated in the diagram above), and generated more than $25 million. Other companies allegedly involved are IBM, Intel, and Mckinsey & Company.

What makes this development interesting is that the SEC is suing in civil court, unlike what Federal Prosecutors have done in the Federal criminal court. The SEC has no power to bring criminal charges. Their only means of enforcement is through civil suit, as Congress has given them standing to sue for enforcement of their regulations. Federal prosecutors can charge the same violations criminally, but only if the actions of the perpetrator were willful (which means that the person knew they were doing something, and that it was wrong) under 15 U.S.C. 78ff(a). The SEC, filing in civil court, need only prove the violation, not the willfulness of the perpetrator.

The SEC's press release may be found here, a pdf of the chart above may be found here, the SEC civil complaint may be found here, and the comments of the SEC director in charge, Robert Khuzami, may be found here.