The news story dominating the airwaves is the guilty verdict delivered today for one Raj Rajaratnam- the infamous hedge fund chief who was taken to task for alleged insider trading in 2009. He was found guilty of 5 counts of conspiracy and 9 counts of securities fraud, which theoretically, if maximum sentencing and fines take place, could add up to $1.2 billion in fines and 205 years in jail.
Will that happen? Probably not. Experts predict 19 years of jail time, and given that the other players in the scheme have been assessed a maximum fee of around $60 million… Raj, a former Forbes billionaire, could end up with a large chunk of his net worth still intact post-fines (if he ever gets out of jail).
We don’t know whether or not he made all of that money illegally. 12 fine folks in the state of New York came to the consensus that at least a portion of his wealth was comprised of ill-gotten gains. But the question remains… would you trade 19 years of your life for over a billion dollars? Even if you only got to enjoy a portion of it?
Many hungry Wall Street types would likely say yes- and have in the past. If you have the right lawyer, after all, you could get away with it. For some, it’s worth a gamble.
Funny (or scary) thing in commodities – there is no such thing as insider trading. There are restrictions against front running customer orders, bunch orders, etc. – but nothing to keep an OPEC member from buying a few thousand Oil futures before they announce plans to cut output, someone with access to unemployment numbers from buying bond futures before their release, and so on….but we’ll save that topic for another day.