oneworldtalk

It is useless to plead innocence or ignorance because these insider traders knowingly broke the law by sharing intelligence for enormous profits. No doubt that it is ill-gotten wealth. They operate like criminal syndicates such as smugglers, thieves, drug dealers and conmen. He who has unfair advantage of inside information and use it to win every gamble is a cheat.

Though reported to be the largest scoop that nabbed wrongdoers in Wall Street, it could be just a tip of the ice berg. With so many fraudulent practices in finance, we understood how the US got into this deep shit* and trouble. Just because some people are breaking the law and have got away with does not make a mistake acceptabble or right. Sure glad that these dishonest fund managers and brokers are finally getting their just desserts.

Update :

Nov. 5 (Bloomberg) -- U.S. prosecutors charged 14 people, including hedge fund managers, lawyers and an ex-Galleon Group employee, for using the methods of “drug dealers” and “common criminals” to profit on insider data from deals involving firms such as 3Com Corp. and Alliance Data Systems Corp.

The charges, brought as part of a wide U.S. probe of Galleon founder Raj Rajaratnam, bring the illicit profits in the case to as much as $53 million. Five of those whose cases were unsealed today have pleaded guilty and are cooperating in the investigation, prosecutors said.

At the center of a new insider trading ring are Zvi Goffer, 32, a former Galleon employee who sought tips, and Arthur Cutillo, 33, an attorney at Ropes & Gray LLP and the ring’s key source of information, federal officials said. Goffer, founder of Incremental Capital LLC, paid tipsters including Cutillo for information on mergers and acquisitions, giving them pre-paid mobile phones so they could avoid surveillance, the U.S. said.

The defendants behaved like “common criminals” who took a “page from drug-dealer handbooks,” Manhattan U.S. Attorney Preet Bharara said today at a press conference. The probe is focused on hedge funds and their sources of information, he said, adding that more arrests may be coming.

As with Rajaratnam, investigators used wiretaps, data- mining and surveillance to target the ring. Authorities have struggled to build cases against large institutional investors such as hedge-fund managers, who often seek to deflect regulatory queries about suspiciously timed bets by arguing they’re statistical flukes amid millions of trades.

Largest Ever

“If you’re a wealthy trader, you aren’t special,” Bharara said, urging Wall Street professionals to come forward to disclose crimes. “Knock on our door before we come knocking on yours.”

Today’s arrests add to last month’s charges against Rajaratnam, 52, and five others in what the government said was the largest hedge fund insider-trading ring ever prosecuted. The U.S. says Rajaratnam received tips from a network of high- ranking executives including co-defendants Rajiv Goel, who worked at Intel Capital, and Anil Kumar, who was a director at McKinsey & Co. All have denied any wrongdoing.

“We’re not just talking about aggressive hedge fund traders who were trying to get an edge,” Bharara said at the press conference. “Someone had to give them that illegal edge. It takes two to tango.”

Charges against the defendants include conspiracy and fraud. The eight people arrested today, after appearing in federal courts in Manhattan and San Francisco, were released on bonds of $100,000 to $500,000.

“Fortuna has pled guilty and accepts responsibility for his conduct,” Richard Schaeffer, his lawyer, said in a phone interview.

Within the ring, Goffer was known as “the Octopussy,” a reference to the 1983 James Bond film starring Roger Moore, the U.S. Securities and Exchange Commission alleged in a related civil lawsuit filed today. The nickname stemmed from his reputation for having multiple sources of inside information, the SEC said.

Goffer gave one of his sources a disposable mobile phone before Bain Capital LLC’s proposed buyout of 3Com, authorities said. The phone had two programmed numbers labeled “you” and “me.” After the deal was announced, Goffer removed the phone’s SIM card, bit it, and broke the phone in half, they said.

“And if you find yourself chewing the memory card in your cell phone to destroy any record of your misconduct, something has gone terribly wrong with your character,” Khuzami said.

The SEC, which said profits in the overall Galleon probe were as much as $53 million, filed a civil complaint against those arrested today. Also sued was the Schottenfeld Group, a New York-based broker-dealer where several defendants works.

Schottenfeld Group said in a statement that it was “shocked by the criminal allegations” against some of its former employees and that it will cooperate with the government.

Wiretaps provided much of the government’s evidence, as it did in the Rajaratnam case. Investigators said in court papers that they tapped Drimal’s mobile phone. Zvi Goffer’s phone calls were intercepted at Galleon almost as soon as he joined the hedge fund, where he worked from January to August 2008, according to court papers.

‘Three Times Bigger’

On Jan. 2, 2008, Goffer had a call from Goldfarb, who had provided inside information on mergers the previous year. At Galleon, Goffer told him, his buying power was “more than three times bigger” than at his previous employer, according to the complaint.

The government’s cooperators pleaded guilty to crimes involving a series of leaks. Steven Fortuna, formerly the managing director of hedge fund S2 Capital, got tips about the quarterly earnings of a technology company, prosecutors said.

Full report in : http://www.bloomberg.com/apps/news?pid=20601103&sid=axP.z_DFC.UM