Raj Rajaratnam to Pay Highest Civil Inside Trading Fine Ever

Raj Rajaratnam, the founder of Galleon Group hedge fund convicted and sentenced to eleven years in prison last summer for insider trading, was ordered to pay $92.8 million in penalties in a separate but related civil claim filed by the Securities and Exchange Commission. The fine is the largest ever assessed in an SEC civil case for insider trading, and is over and above the $53.8 million authorities seized from Rajaratnam in connection with the criminal case and a $10 million fine levied by the criminal court.

In addition to being fined more than anyone ever convicted of insider trading, Rajaratnam’s 11-year sentence is also the longest prison term ever handed out in an insider trading case. After being convicted of 14 counts of securities fraud and conspiracy in May, Rajaratnam was sentenced last month, and will begin serving his sentence December 5th.

After Wednesday’s ruling in the civil matter, SEC enforcement chief lauded the decision, saying the penalty was appropriate given the historic proportions of Rajaratnam’s illegal conduct and its impact on the integrity of US financial markets. U.S. District Judge Jed Rakoff, who set the fine, said that an enormous fine was necessary make it perfectly clear that insider trading is a losing proposition. Rakoff said he arrived at the amount of the fine by tripling an estimate of Rajaratnam’s gains in the case. SEC officials, meanwhile, had wanted Rakoff to use a higher base figure, but Rakoff went with $30.9 million.