Raj Rajaratnam arrest 'just the start of insider trading cases'

19 October 2009

The arrest of billionaire hedge-fund manager Raj Rajaratnam is set to be just the start of insider trading cases brought against Wall Street figures, according to media reports.

Mr Rajaratnam was arrested late last week with five others over allegations that he was part of the largest insider-trading scheme ever seen.

It is alleged that his firm made around $18 million through an insider-trading ring.

Wiretaps recording Mr Rajaratnam having conversations with alleged co-conspirators are believed to be the basis of the case against him.

The federal investigators who brought the case against him are set to make a wave of further arrests targeted at insider-trading networks, according to an unnamed source speaking to Bloomberg.

A two-year investigation has brought Securities and Exchange Commission officials to the brink of arresting a number of targets including lawyers and hedge-fund managers.

Investigators have supplemented their use of wiretaps with a complex data-mining operation, which looked into groups of people who were making suspiciously well-timed stock investments.

FBI agents were also involved in the probe into Mr Rajaratnam's activities and it is believed they had at least one informant giving them details of alleged crimes.

Bill Mateja, a former Justice Department lawyer, told Bloomberg that the use of such tactics was necessary in building a case.

"Insider-trading cases are notoriously difficult to prosecute because the evidence is often circumstantial," he said.

"If law enforcement is actively going to go out and target this with covert investigative techniques, I think it's going to keep people on their toes."

Last weekend, the Sri Lankan government claimed that Mr Rajaratnam was also involved in funding the Tamil Tigers, a group considered terrorists by the US government.

A spokesman for the Sri Lankan defence ministry told the Financial Times that it had been monitoring him for several years.

Jim Walden, Mr Rajaratnam's defence attorney, said his client denied the insider-trading charges and had no association with the Tamil Tigers.

By Claire Archer

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