Securities and Exchange Commission v. Rajat K. Gupta and Raj Rajaratnam, Civil Action No. 11-CV-7566 (SDNY) (JSR)
SEC Obtains Final Judgment on Consent as to Raj Rajaratnam
The Securities and Exchange Commission recently announced that, on December 26, 2012, the Honorable Jed S. Rakoff, United States District Judge, United States District Court for the Southern District of New York, entered a Final Judgment, on consent, as to former hedge fund manager Raj Rajaratnam in the SEC’s insider trading case, SEC v. Rajat K. Gupta and Raj Rajaratnam, Civil Action No. 11-CV-7566 (SDNY) (JSR). The final judgment orders Rajaratnam to pay $1,299,120 in disgorgement and $147,738, in prejudgment interest, for a total of $1,446,858.
The SEC’s complaint, filed October 26, 2011, alleges that, among other things, Rajat K. Gupta tipped his business associate Raj Rajaratnam, Galleon Management’s founder and managing general partner, to confidential information Gupta learned in the course of his duties as a member of the Board of Directors of The Goldman Sachs Group, Inc. The complaint alleges that Gupta disclosed material nonpublic information concerning Berkshire Hathaway Inc.’s $5 billion investment in Goldman Sachs in September 2008, and concerning Goldman Sachs’s financial results for both the second and the fourth quarter of 2008. Rajaratnam used the information he learned from Gupta to trade profitably in certain Galleon hedge funds. By engaging in this conduct, Gupta and Rajaratnam violated Section 10(b) of the Securities Exchange Act of 1934, Exchange Act Rule 10b-5, and Section 17(a) of the Securities Act of 1933.
On June 15, 2012, in a parallel criminal case arising out of the same facts, Gupta was convicted of one count of conspiracy to commit securities fraud and three counts of securities fraud. On October 24, 2012, Gupta was sentenced to two years in prison and one year of supervised release, and ordered to pay a $5 million criminal fine.
The Final Judgment in the SEC’s case orders Rajaratnam to disgorge his share of the profits gained and losses avoided as a result of the insider trading plus prejudgment interest on that amount. The SEC’s claims against Gupta remain pending.
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