In a case stretching from Wall Street to Silicon Valley, federal prosecutors charged what they say is a ring of insider traders with manipulating the shares of tech companies like Google and IBM.
Raj Rajaratnam, a hedge-fund manager whose net worth Forbes recently estimated at $1.3 billion, was accused of using inside information to make $25 million in illicit profits for Galleon Management, a hedge-fund operator, according to a complaint filed in federal court in Manhattan (PDF).
Rajaratnam's alleged accomplices included two Silicon Valley power brokers: Rajiv Goel, a director of strategic investments within Intel's treasury department, and Anil Kumar, a Santa Clara, Calif.-based director at McKinsey, the management-consulting firm.
"Goel has been placed on administrative leave as we look into this matter," said Intel spokesman Chuck Mulloy. "Intel was not aware of this case and was not contacted by investigators. If we are contacted, we will cooperate."
According to the SEC, Goel gave Rajaratnam inside information about Intel's quarterly earnings and a pending deal with Clearwire, the wireless-network operator, in which Intel owns a stake. Goel allegedly made $250,000 from his participation in the scheme.
Intel is conducting its own internal investigation while the company looks into the matter, Mulloy said.
It was the largest such case pursued against a hedge fund, prosecutors said.
"Greed is not good," U.S. Attorney Preet Bharara said at a news conference. "This case should be a wake-up call for Wall Street."
Investigators used wiretaps to pursue the case. One participant reportedly said, "I'm dead if this leaks. I really am. ... and my career is over. I'll be like Martha (expletive) Stewart."
Stewart was famously convicted in 2004 of obstructing justice in an investigation into insider trading.
According to the complaint, participants discussed placing other ring members in tech companies to obtain more inside information.