Raj Rajaratnam, the founder of Galleon Group and former billionaire, was born on
June 15th 1957 in Sri Lanka. The Galleon Group was a New York-based hedge fund management firm that managed at one time over $7 billion.
The billionaire Raj Rajaratnam was charged with insider trading along with five other people who all had very prominent roles in American business. This caused the Galleon Group to close its business. He was compared with Gordon Gekko, a fictional character in the movie “Wall Street” with Michael Douglas in the lead role, by the media. Just like Gordon Gekko, Rajaratnam made use of inside information to enrich himself and his partners. His insider trade was discovered by the authority back in 2007, and it was reported that the police was tipped off by an unnamed source.ALSO READ: Defrauded his clients for $50 billion.
Insider trading can be done in multiple ways. One way is when a stockbroker, or anyone else for that matter, who receives confidential information of a nature that could affect the share price or the value of what they are dealing with and using this information to acquire benefits like an increase in the value of their shares. For example a person who learns that a business is going to be acquired and just before the sale finalizes the person makes use of the opportunity to buy additional number of shares and make money off of it and this is exactly what Raj Rajaratnam and his group did.
People who don’t trade stocks in particular are often relatively easy to catch when it comes to insider trading since they may have difficulty explaining uncharacteristic behavior, such as suddenly invest very heavily in a share just before an important event that occurs and that specific company.
On the other hand hedge funds are very difficult to catch since they make huge investments every year. Good timing with a share just before a major event that occurs in a company can usually with simplicity be explained away as a mere coincidence.
How he did it
Rajaratnam received information about companies that weren’t public, but had weight in the market. Major insider trading occurred inside giant companies like Google, Polycom and Hilton Hotels. One of the defendants, Robert Moffat sat on top of the management at IBM, and he was the one who reportedly leaked classified information about IBM to Rajaratnam.
Rajaratnam was ranked the 559th richest man in the world by Forbes and was worth $1.3 billion at that time.
The Galleon Company had as much as $7 billion under management, but this fell to almost $2.5 billion at the beginning of 2009. His net worth was $1.8 billion in 2009 and he made over $50 million personally through his insider trading business.
Rajaratnam was sentenced to 11 years in prison on October 13th 2011 and fined a civil and criminal penalty of over $150 million.ALSO READ: Wonder boy rubs shoulders with top politicians and businessmen.
Lesson to learn
Raj Rajaratnam had a great life and earned millions and probably billions of dollars before he started doing insider trading. Why did he choose to do insider trading?
He chose to do insider trading because of his greed. To some people having a lot of money isn’t enough, they want more, and in the end they pay for it.
A lesson to learn here is to keep your feet on the ground, be humble and be honest about everything you do regarding work and making money. Of course, a little bit of greed is not a bad thing, but don’t be too greedy. Find a place somewhere in the middle.