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Insider Trading Convictions Upheld

Posted: Wednesday, July 10th, 2013 at 11:19 am

Since the so-called Great Recession, public sentiment toward Wall Street has been anything but positive. And as some might have guessed, investigations into banks, funds and trading firms has resulted in numerous charges being filed against various Wall Street figures. In 2011, three former traders were convicted on insider trading charges related to a $10 million operation. One of the three, Zvi Goffer, was sentenced to 10 years, which constitutes the third-longest sentence for insider trading ever given in the United States. The other traders associated with Goffer, Michael Kimelman and Craig Drimal, received sentences of two-and-a-half and five-and-a-half years, respectively. This week, the United States Court of Appeals for the Second Circuit affirmed all three convictions.
The Second Circuit affirmed the convictions in a 43-page opinion that addressed each contention of the appealing parties, noting that the sentences given to all three were procedurally and substantively reasonable. The court also addressed concerns about sufficiency of evidence and the appropriateness of jury instructions, finding no problems with either. However, the Second Circuit did find that the amount Goffer was ordered to forfeit – $10 million – had to be recalculated.
While affirming the convictions of these individuals obviously depends upon the particular facts and circumstances of those events, it is perhaps a symbolic indication that the government is serious about cracking down on insider trading. In another decision underscoring the seriousness with which the United States government is taking financial industry prosecutions, the Second Circuit similarly affirmed the 11-year sentence of Raj Rajaratnam. Rajaratnam was convicted in 2011 after insider trading was discovered in connection with the hedge fund Rajaratnam founded, called Galleon.
While Rajaratnam’s sentence of 11 years is undoubtedly a long one, particularly in the insider trading context, prosecutors in his case originally suggested a sentence of 24 and a half years. However, the sentencing court elected to provide a lenient sentence in light of Rajaratnam’s health problems. The Galleon insider trading resulted in allegations against several other individuals, including Rajaratnam’s younger brother Rengan, who was convicted this spring.

Since the so-called Great Recession, public sentiment toward Wall Street has been anything but positive. And as some might have guessed, investigations into banks, funds and trading firms has resulted in numerous charges being filed against various Wall Street figures. In 2011, three former traders were convicted on insider trading charges related to a $10 million operation. One of the three, Zvi Goffer, was sentenced to 10 years, which constitutes the third-longest sentence for insider trading ever given in the United States. The other traders associated with Goffer, Michael Kimelman and Craig Drimal, received sentences of two-and-a-half and five-and-a-half years, respectively. This week, the United States Court of Appeals for the Second Circuit affirmed all three convictions.

The Second Circuit affirmed the convictions in a 43-page opinion that addressed each contention of the appealing parties, noting that the sentences given to all three were procedurally and substantively reasonable. The court also addressed concerns about sufficiency of evidence and the appropriateness of jury instructions, finding no problems with either. However, the Second Circuit did find that the amount Goffer was ordered to forfeit – $10 million – had to be recalculated.

While affirming the convictions of these individuals obviously depends upon the particular facts and circumstances of those events, it is perhaps a symbolic indication that the government is serious about cracking down on insider trading. In another decision underscoring the seriousness with which the United States government is taking financial industry prosecutions, the Second Circuit similarly affirmed the 11-year sentence of Raj Rajaratnam. Rajaratnam was convicted in 2011 after insider trading was discovered in connection with the hedge fund Rajaratnam founded, called Galleon.

While Rajaratnam’s sentence of 11 years is undoubtedly a long one, particularly in the insider trading context, prosecutors in his case originally suggested a sentence of 24 and a half years. However, the sentencing court elected to provide a lenient sentence in light of Rajaratnam’s health problems. The Galleon insider trading resulted in allegations against several other individuals, including Rajaratnam’s younger brother Rengan, who was convicted this spring.

 

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