Bernie Madoff is the financial criminal of the past. Billionaire hedge fund chief Raj Rajaratnam is the financial criminal of the moment! Slick back your hair, watch Wall Street, and forget Ponzi schemes—insider trading is back, big time!

Raj Rajaratnam is the co-founder of the hedge fund Galleon Group. Last Friday, he was arrested and charged with the biggest insider trading scheme that Wall Street has seen in recent history. Let's briefly recap this spectacular criminal web!

  • The SEC says that Rajaratnam used a vast web of inside informants at various companies to trade on them illegally using inside information. He and five others have been charged in this case, including two from another hedge fund and one IBM executive. Rajaratnam allegedly paid cash and favors to insiders in return for information, and made more than $20 million in profit on the ensuing trades.
  • Rajaratnam himself (who claims he's innocent) is a Sri Lankan native who's been a fundraiser for causes there (including, allegedly, the Tamil Tigers, who are designated as terrorists by the US government). He's also the largest individual investor in Sri Lanka, and stocks there fell on the news of the charges.
  • This is the largest insider trading case ever connected to a hedge fund. That makes the publicity-and-regulation-averse hedge fund world nervous. However, at least three former Rajaratnam colleagues are helping the government build its case against him.

Incriminating telephone transcripts? This case has 'em! The best are tapes of Danielle Chiesi of New Castle Funds (pictured), also charged with insider trading in the case. She sounded less than innocent:

  • Robert Moffat, a top IBM exec, was also arrested in the case, for leaking inside info. His arrest reportedly caused "cheering in the halls" by unionized workers.
  • Anyhow, Rajaratnam's out on $100 million bail and he's supposed to be addressing Galleon employees in the office today, so be sure to email us and let us know what he says!