As has been well publicized, a New York jury has convicted Raj Rajaratnam, founder and principal of the Galleon Group, of all 14 counts charged against him in a criminal indictment. The case is widely and correctly perceived as a seminal case in the prosecution and defense of insider trading. Many commentators have proclaimed that this will encourage aggressive prosecutions in the future, signals the end of the mosaic defense, and is a significant victory for the prosecutors. On a closer look, however, this verdict was neither the easy result the prosecutors might have expected nor the end of sound defenses in insider trading cases. In many ways, this verdict stems from unique facts not present in many insider trading prosecutions. While the full implications of the case will have to await the outcome on appeal, two lessons are immediately apparent.
Published by A.S. Pratt in the September 2011 issue of the Financial Fraud Law Report
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