A US judge on Tuesday cited the “huge and brazen” nature of the crime as he imposed a record US$92 million civil penalty on a billionaire hedge fund boss snared in the biggest insider trading case ever.
US District Judge Jed Rakoff ordered the penalty for Raj Rajaratnam, saying his insider trading scheme “cries out for the kind of civil penalty that will deprive this defendant of a material part of his fortune.” Rakoff said civil penalties were designed by the US Securities and Exchange Commission (SEC) to be severe enough to ensure that insider trading was a money-losing proposition.
Rajaratnam was arrested in 2009, the same year he was ranked No. 559 by Forbes magazine among the world’s wealthiest billionaires, with a net worth of US$1.3 billion. His attorneys have said he is no longer a billionaire.
Rajaratnam, 54, was convicted this year of insider trading and sentenced last month to 11 years in prison. In the criminal case, he was fined US$10 million and ordered to forfeit US$53.8 million in what the judge said were illicit profits from trading on confidential corporate information. He is scheduled to report to prison on Dec. 5.
Prosecutors said Rajaratnam earned as much as US$75 million in illegal profits in a case that resulted in more than two dozen convictions.
Rakoff said he arrived at the penalty figure by taking the US$30.9 million figure recommended by Rajaratnam’s lawyers and tripling it.
In a statement the SEC said the “The penalty imposed today reflects the historic proportions of Raj Rajaratnam’s illegal conduct and its impact on the integrity of our markets,” SEC Division of Enforcement director Robert Khuzami said.
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