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Federal prosecutors announce 7 new indictments in hedge fund probe

By Bernard Hibbitts (editor) and University of Pittsburgh School of Law students.

[JURIST] Federal prosecutors on Thursday announced the indictment of seven more individuals in connection with the probe surrounding Galleon Group hedge fund founder Raj Rajaratnam and former hedge fund consultant Danielle Chiesi. The seven defendants were originally arrested in November on insider trading charges, and the 10-count indictment includes additional charges of securities fraud and conspiracy to commit securities fraud. Thursday's indictment brings the total number of indicted individuals to nine in the probe that currently involves 21 people and is being called the largest hedge fund insider trading probe ever. Seven of those have already entered guilty pleas and the government said last week that an eighth plea agreement is close. Rajaratnam and Chiesi were arrested in October and charged along with four other individuals and two business entities with insider trading. The complaint alleged that the individuals, including a managing director at Intel Corp., a director at McKinsey & Co., and a senior executive at IBM, provided Galleon Group and another hedge fund with material nonpublic information about several corporations upon which the funds traded, generating $25 million in illicit gain. Rajaratnam and Chiesi pleaded not guilty in December after being indicted for insider trading. Separately, the government of Sri Lanka has accused Rajaratnam of helping fund the Tigers of Tamil Eelam (LTTE), a group designated as a terrorist organizations by several countries including the US. Although records show that Rajaratnam contributed money to the Tamil Rehabilitation Organization, a charity that the US claimed was a front for the LTTE, Rajaratnam denies funding the LTTE and has not been charged with funding the LTTE.

Full post as published by JURIST - The Paper Chase on January 22, 2010 (boomark / email).