On May 11^th 2011, news channels flashed a particular headline across their scrolling bars which read, “Rajaratnam guilty of Insider Trading: Faces upto 19 years in prison”. This particular verdict garnered attention across the globe in regards to the significance of insider trading and the history behind the largest hedge fund insider trading case in history.

Insider trading is the buying and selling of corporate stock by an individual having access to information that has not been made public and is supposed to remain confidential. In other words, it implies in illegal dealing in shares by people who because of their privileged position, have information which impacts the values of shares, before that information is made public. For example, if a particulars CEO sells all or most of his stocks days before the annual report is announced which have a negative earning report is known as insider trading.

Raj Rajaratnam was a relatively unknown person until now. One of the richest people in Sri Lanka, Rajaratnam was the co-founder of the Galleon hedge fund. Greed got the better of him when he began insider trading on other major companies stocks. He has been accused of making over $63.8 million in illegal profits from trades based on insider tips on public companies including Google, Hilton and Intel.

Insider trading has very much been in existence since the days of 1800s when government officials profited from manipulating railroad and mail company stocks. With the development of time, insider trading has become extremely sophisticated with internal information being disseminated from sources hidden from the eyes of the authorities. Rajaratnam created good rapport with a number of high ranking corporate executives and insiders and used this network to obtain confidential details about quarterly earnings and takeover activity consequently using it in his trading strategies.

Rajaratnam was arrested in October 2009, when evidences were gathered regarding his insider trading activities on the back of a conspiracy involving Rajat Gupta, a former Goldman Sachs Group Inc. director who leaked information of his company’s earnings which Rajaratnam used to make a substantial amount of profit. Other accusations include Rajat Gupta’s telephone calls to Rajaratnam which tipped him of a particular $5billion Investment in Warren Buffet’s Berkshire Hathaway Inc.  Rajaratnam sold off all his Goldman Sachs shares 4 minutes after the markets opened after acquiring information from Rajat that the firm was declaring a quarterly loss. Gupta had stepped down from his position in Goldman Sachs Boards last year and had also resigned from Procter and Gamble this week.

Gordon Gekko (Micheal Douglas) had famously uttered these words in the 1987 hit movie, Wall Street- The most valuable commodity I know of is information. But Raj Rajaratnam can easily vouch right now that it is indeed not the most valuable.