(credit: REUTERS/ Shannon Stapleton)
Ah, spring! Baby birds stretch their wings, trees release deadly spores, and Wall Street awakens from its long post-Ponzi slumber. You know, Ponzi. Scheme. Ponzi scheme. Madoff?
But we digress. Today’s news is about Raj Rajaratnam, the founder of a successful hedge fund called Galleon Group. He’s been accused of insider trading – this is, unfairly using information from outside sources in order to make a big profit for his company (and himself).
Here’s what you need to know about Bernie and Raj:
- 1. Madoff has already been tried, convicted, and sent to prison for 150 years. Raj is just on trial – and he’s still innocent until proven guilty. If he is proven guilty, though, he’ll be in the clink with Bernard for up to 25 years.
- 2. Madoff ran a Ponzi scheme – he collected money from new investors and handed much of it over to existing investors, calling it a return on their investment. In other words, he just moved the money around instead of investing it. It involved a huge network of people, funds, customers, billions of dollars, and many, many handshakes.
- Galleon Group is accused of insider trading by using a small network of tipsters from different companies. These tipsters [allegedly] shared valuable corporate secrets with Galleon, and Galleon [allegedly] used that information to make a killing on the trading floor. All very fine line behavior.
What would you do if someone gave you valuable information about a potential investment win?