Overview
This video from Wall Street Millennial explores high-profile insider trading cases, examining how top investors and public figures engaged in illegal trading activities, the resulting legal consequences, and their impact on reputations and institutions.
The Concept of Insider Trading
- Insider trading is trading a public company's stock based on material, non-public information.
- The practice is illegal as it provides unfair profit opportunities at the expense of other investors.
Raj Rajaratnam and the Galleon Group
- Raj Rajaratnam founded the successful Galleon Group hedge fund.
- He was arrested in 2009 for earning $60 million through insider trading from 2003-2009.
- Raj received confidential information from executives at major firms and friends from Wharton.
- He was sentenced to 11 years in prison; 13 others were also convicted.
- Raj donated millions to organizations with alleged terrorist links, leading to further controversy.
- Due to health issues, he was allowed to serve his sentence in home confinement.
Martha Stewart's Insider Trading Case
- Martha Stewart sold Imclone stock in 2001 after receiving a tip about failed drug trials.
- She avoided $45,000 in losses but was convicted of conspiracy, obstruction of justice, and making false statements.
- Stewart served five months in prison and received supervised release; the case damaged her brand significantly.
Robert Foster Winans and the Wall Street Journal
- Winans profited $31,000 by tipping off a broker about stock recommendations in his Wall Street Journal column.
- Convicted of insider trading and mail fraud after legal debate over his duty of confidentiality.
- Served nine months in prison; case highlighted complexities of insider trading laws.
SAC Capital and Stephen A. Cohen
- SAC Capital, led by Steve Cohen, faced a major insider trading investigation.
- Portfolio manager Matthew Martoma earned over $276 million in illegal profits from drug trial information.
- Martoma and other employees were convicted; SAC Capital paid nearly $2 billion in fines and shut down outside management.
- Steve Cohen was not jailed and later rebranded SAC as Point72, which remains highly successful.
Rene Rivkin’s Case in Australia
- Rene Rivkin bought shares based on confidential merger information, profiting only $346.
- He received a 9-month weekend detention and a lifetime ban from stockbroking.
- Rivkin tragically died by suicide in 2013.
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