Original URL: http://www.theregister.co.uk/2011/11/09/record_sec_fine_for_insider_trader/

SEC slaps inside trader with record $93m fine

Bent tycoon traded dirty on IBM, Intel

By Anna Leach

Posted in Security, 9th November 2011 17:37 GMT

Insider trading does not pay, a judge in an American civil court declared, putting a record fine on Raj Rajaratnam, the businessman who was found guilty of insider trades using a network of tech insiders – including executives at IBM and Intel.

The $92.8m fine handed down by Judge Jed Rakoff is in addition to an 11-year jail sentence Rajaratnam already faces from his federal case. The former fund manager's dodgy deals through hedge fund Galleon included trades on Intel and IBM. The reward will be collected by the Securities and Exchange Commission (SEC), which brought the case against the billionaire in October 2009.

“This case cries out for the kind of civil penalty that will deprive this defendant of a material part of his fortune,” Rakoff wrote in the order, according to the FT. He added that SEC civil penalties were necessary to send a message that insider trading was a “money-losing proposition”.

The SEC noted that the judgment marked "a record financial penalty". Robert Khuzami, director of the SEC’s Division of Enforcement, reflected that, “The penalty imposed today reflects the historic proportions of Raj Rajaratnam’s illegal conduct and its impact on the integrity of our markets.”

The Rajaratnam case has led to 29 individuals being charged, including former McKinsey & Co worldwide head Rajat K Gupta and Robert Moffat, and involves the assets of several Silicon Valley companies as well as Wall Street dealers.

Adding up the amount Rajaratnam has already paid out for in compensation, his total bill comes to $156.6m – including charges of $53.8m in forfeiture of illicit gains and $10m in criminal fines. The Sri Lankan also faces 11 years in the nick – the longest prison term ever given for insider trading. ®