Richest Sri Lankan in World arrested in terrorism investigation turned first wiretapped insider trading scam ever (not to mention the largest!)

We have been a bit absent from the blog as late, but just HAD to mention this:

NEW YORK (Reuters) – Billionaire hedge fund founder Raj Rajaratnam and executives from some of the most prestigious U.S. companies were charged on Friday with the largest hedge fund insider-trading scheme ever.

Investigators said they used court-approved telephone wire taps for the first time in a Wall Street insider trading case, sending shivers through the hedge fund industry which has traditionally picked up and shared trading tips to make big profits.

I couldn’t help but be reminded of The Wire Season Two where The Wire crew tap the phone lines of some white dock workers involved in the drug trade. The crew are initially stunned that the workers talk about things openly on the phone (i.e. take virtually no precautions against phone tapping) and  the reason is, of course, that the workers weren’t expecting to have their phones tapped, while the black drug dealers were….

One of the criminal complaints accuses Rajaratnam, 52, considered the richest Sri Lankan in the world, of conspiring with Intel Capital treasury department managing director Rajiv Goel and Anil Kumar, a director of McKinsey & Co. The alleged offenses took place over three years starting in January 2006.

Rajaratnam, born into a family of well-to-do Tamils in the Sri Lankan capital of Colombo, is one of the largest investors on the Colombo Stock Exchange.

Last month, he pledged $1 million to help pay for the rehabilitation of former soldiers of the separatist “Tamil Tigers,” which fought 25 years to create a separate state for Sri Lanka’s minority Tamils but were defeated in May.

But on Friday, he was handcuffed and walked in front of TV cameras as federal agents arrested him.

via Yahoo!

This case combines financial fraud, Wall St, South Asia/Sri Lanka, and terrorism (i.e. ALL of our interests!) in one giant story:

Rajaratnam,, a Tamil born in Colombo, Sri Lanka, and widely regarded as a Wall Street wonder boy for perpetual returns over 10 percent, was not indicted in that case. The trial, scheduled to begin Sept. 25, has been postponed until February.

“He is not a master of the universe,” said Robert Khuzami, director of enforcement at the Securities and Exchange Commission, at a press conference Friday and reported by the New York Times’ DealBook blog. “He is a master of the Rolodex.” According to the indictment, Rajaratnam and his codefendants “routinely received inside information directly or indirectly from insiders and provided it to each other for the purpose of trading based on the information,” netting more than $20 million in illegal profits in 2006 and 2007.

via Christian Science Monitor

Not only that but the story manages to throw some egg on the face of Hillary Clinton as well (making it worth a couple of hundred extra bonus points on the newsworthy scale):

Sri Lankan born Rajaratnam is accused of operating an elaborate insider trading operation which made him one of the wealthiest men in the United States with an estimated net worth of 1.3 Billion US Dollars. He has been arrested along with five others. Rajaratnam is accused of giving more than 3.5 Million Dollars to the Tamil Rehabilitation Organisation (TRO). It is revealed that he had chanelled funds to the LTTE through his Galleon Group Hedge Fund launched during the 2004 Tsunami. Rajaratnam and his wife were also major contributors to a number of democratic campaigns.

He had largely supported Hilary Clinton’s election campaign. In addition his associates formed a “Tamil For Clinton Fund Raising Group” for her Presidential campaign and sought her help in getting the Tamil tigers taken off the State Department’s designated terror list. It was thereafter that Clinton said all terrorists cannot be treated alike.

via Independent Television Network (Sri Lanka)

Which I guess means the Asian Tribune was right all along:

The Island of 2nd October had a news item about Hillary Clinton making allegations that rape had been used as a weapon in Sri Lanka’s successful war against the LTTE. Hillary, while chairing a meeting of the UN Security Council had referred to Balkans, Burma and Sri Lanka and said that perpetrators of rape in war go unpunished….

She cannot deny the fact that she is making these unfounded allegations to pacify the Tamil diaspora who backed her during the Presidential elections by their votes and funding.

So instead of pointing the finger at the Sri Lankan army she should examine the role of the US army in Iraq and Afghanistan as other countries are not blind to US policies.
Even the people in the US do not seem to take her statements seriously otherwise she would have had a different role today!

via Asian Tribune

Wall Street Journal further expounds on Rajaratnam’s links to terrorism, turns out the investigation into him originally started in order to investigate his links to terror: making Ratnajaram the ultimate 24 baddie cliche!

A few other curiosities pop up because of this case. One blogger (whose page I browsed but then, unfortunately, lost) remarked that the case symbolises US cultural diversity… FINALLY we have a coloured man being hauled off for fraud as opposed to the whiteys of the 80s. Non-whites not only have the Presidency but they have the white collar fraud indictments as well. Yay for us!

None of this affirmative action is really inspiring a whole lotta confidence in Galleon finance (Rajaratnam’s firm)though, investors have already filed nearly $1bn worth of redemption requests. If it wasn’t for the links to terrorism I think it unlikely Rajaratnam would have ever been caught. Certainly his case probably wouldn’t have been the first to have been subject to wiretaps; food for thought for any Wall Street Masters of the Universe thinking of backing any other ‘secessionist’ movements any time soon…

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