Raj Rajaratnam's Alleged Insider Trading Scheme May Have Been Twice as Big as Thought -- $36 Million
College friend Anil Kumar pleads guilty to conspiracy and securities fraud.
Jan. 7, 2010 — -- A McKinsey & Company director accused of leaking information in the largest hedge fund insider trading case ever pleaded guilty today to conspiracy and securities fraud.
Anil Kamar pleaded guilty to "conspiring to commit inside trader crimes with Raj Rajaratnam," said the U.S. Justice Department.
Kumar is thought to be cooperating with federal prosecutors about his role in feeding information to hedge fund billionaire Raj Rajaratnam, who is accused of running a $20 million insider trading scheme.
Kumar's agreement to waive indictment was a sign he was helping the feds, who may soon reveal that the alleged size of the scheme was far larger than originally reported.
Rajaratnam, founder of the Galleon Group hedge fund, has already pleaded not guilty to charges of security fraud in connection with allegations that inside information helped him to build Galleon into a multi-billion dollar enterprise. At its height, Galleon held $7 billion in assets.
Prosecutors had accused Kumar of providing inside information about Advanced Micro Devices Inc., a company he advised, to Rajaratnam. Kumar and Rajaratnam had been friends since attending the M.B.A. program Wharton School at the University of Pennsylvania.
But on Tuesday, the U.S. Attorney's office filed a brief opposing Rajaratnam's motion to cut his $100 million bail to $20 million, in which it noted that a superseding indictment including more charges was expected to be filed against Rajaratnam.
The expanded insider trading charges will include the allegation that he earned more than $36 million in illicit profits – double the amount earlier alleged, according to court papers.
The government brief stated those charges would include insider trading between March and July 2006 over an acquisition of ATI Technologies Inc by Advanced Micro Devices Inc. It said the information came from an unidentified source "to whom Rajaratnam began making large payments in exchange for inside information in or about 2004."
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