Early in New York on Thursday morning, CNBC reported that seven people had been arrested in what was described only as “an ongoing insider trading case related to hedge funds.”
It has since become clear that the arrests are linked to the allegations against Raj Rajaratnam and the Galleon hedge fund.
Here’s what we know:
- Fourteen people were facing charges.
- The FBI has arrested eight people - including former employees of the trading firm Schottenfeld Group, an attorney at law firm Ropes & Gray, and former employees of hedge fund Incremental Capital. Of those in custody, 7 were arrested in New York and one on the West Coast.
- According to court documents, those arrested were Craig Drimal, who “worked in Galleon’s office space” but was not employed by the hedge fund; Arthur Cutillo of Rope & Gray; attorney Jason Goldfarb; Emanuel Goffer, formerly of Spectrum Trading LLC and currently associated with Incremental Capital; David Plate and Michael Kimelman of Incremental Capital.
- Also arrested was Zvi Goffer, who according to court documents, was formerly of Schottenfeld and later Galleon and “started operating a trading firm called Incremental Capital” in 2008.
- Those facing charges include Ali Hariri, a former executive at Atheros, facing two counts - conspiracy and securities fraud; Deep Shah, a former associate analyst at Moody’s, is also facing conspiracy and securities fraud.
- Federal prosecutors will hold a press conference at noon, ET, in New York.
The arrests are not unexpected, but are indicative of the scope and complexity of the case (and the post-Madoff zeal of regulators to never again be so comprehensively caught out).
As Reuters reported earlier on Thursday:
Investigators expect more people to be charged in the Galleon hedge fund insider trading case, and they said they have cooperating witnesses to strengthen their case against the fund’s billionaire founder, Raj Rajaratnam.
In statements at a court hearing and in briefs on Wednesday in parallel federal civil and criminal cases, the government signaled publicly for the first time since Rajaratnam and five others were arrested on October 16 that its net was widening.
“There is a real possibility that we will be adding additional parties,” U.S. Securities and Exchange Commission lawyerFT Alphaville will provide updates as more details of the arrests and charges emerge.
Related links:
Judge sets date for Galleon civil case - FT
Galleon paid banks millions for ‘edge’ - FT
Galleon fears raised in 2001 - FT
Ex-AMD head drawn into Galleon probe - FT
