Four Indians among 20 charged in largest hedge fund scam

The FBI has charged a further 14 people, including two Indians and Wall Street professionals, in a widening USD53-mn insider trading scam, the largest ever such case in the United States.

The latest action brings the number of people who have been charged in the case to 20, including four Indians.

The scam came to light last month with the arrest of Sri Lankan Tamil-origin billionaire Raj Rajaratnam, founder of the Galleon Group and hedge fund operator, and five others, two of whom were Indians.

Deep Shah, a former analyst at the Moody's Investor Service, and Gautham Shankar, a former proprietary trader at Schottenfeld Group in New York, were charged yesterday.

Shankar has pleaded guilty, while Shah is still at large.

Anil Kumar and Rajiv Goel (both 51) are the two other Indians who were were arrested last month for allegedly committing the fraud.

US attorney Preet Bharara and New York's assistant FBI director Joseph Demarest today said the accused took part in insider trading schemes that "generated more than 20 million dollars in illegal profits."

The people charged included hedge fund managers and trading firm executives, lawyers and corporate insiders, the prosecutor and FBI officer said in a statement.

Of the 14, eight were arrested yesterday, while a ninth man was being sought, and later released on bail. Five others had already been charged and have pleaded guilty in a court in New York.

Atheros Communications Inc executive Ali Hariri has been charged with passing on confidential information to a hedge fund manager Ali Far who has pleaded guilty of fraud and is now reportedly cooperating with the investigators.

"People will probably ask just how pervasive is insider trading these days? Is this just the tip of the iceberg? We aim to find out," said Preet Bharara, the US attorney for the Southern District of New York.

Rajaratnam received 13 charges, four counts of conspiracy and eight counts of security fraud.

Galleon Group is a hedge fund with up to USD7 bn in assets under management. Out of the USD20 mn, Rajaratnam alone made USD12.7 mn in illegal profits for Galleon.

This is the first case to use authorised wiretaps, and the investigators are still on the job.