Fourteen more people face criminal charges in the federal insider-trading probe that earlier had led to the arrest of Raj Rajaratnam and the closing of his hedge fund firm, Galleon Group.
Among those arrested this morning were Zvi Goffer, a former Galleon employee who currently operates broker-dealer Incremental Capital; Arthur Cutillo, an attorney at the law firm Ropes & Gray; and Jason Goldfarb, a New York attorney, according to an announcement today by Preet Bharara, the U.S. Attorney in New York.
Mr. Rajaratnam and five others were charged Oct. 16 in connection with the ongoing crackdown that federal investigators say generated more than $40 million in illegal profits for the 20 now charged in the case.
Mr. Goffer is accused of paying Mr. Cutillo for inside information on mergers and acquisitions involving Ropes & Gray clients. Mr. Cutillo, in turn, is accused of passing that information along to Mr. Goldfarb. Mr. Goldfarb, it is alleged, then provided the information to Mr. Goffer, who used prepaid cell phones to try to cover his tracks, according to the charges from the U.S. Attorney's office.
In a statement, Ropes & Gray, said: “We are deeply disappointed to learn about this situation, which suggests an extreme breach of this (Mr. Cutillo's) duty of trust to our clients and to the firm. We cannot comment in detail on an ongoing investigation, but we are moving quickly to protect our clients and are cooperating fully with authorities.”
Also, Deep Shah, a former analyst for Moody's Investors Service, is accused of selling inside information on another transaction to a cooperating witness in the case, according to the charges from the U.S. Attorney's office.
Ms. Shah, who was also charged in the case today, remains at large, according to the U.S. Attorney's office.
At a news conference, Mr. Bharara said the joint investigation with the FBI and SEC is continuing and will use aggressive tactics, including wiretaps and confidential informants.
“When we announced our first arrests three weeks ago, I said this case should be a wake-up call for Wall Street,” Mr. Bharara said. “Today, the alarm bells have only grown louder. When criminal activity is your business model, business as usual has to stop.”
Separately, a news release from Mr. Bharara's office said five of the 14 defendants charged today have pleaded guilty to insider trading charges: Steven Fortuna, former managing director of hedge fund S2 Capital; Ali Far, founder of hedge fund Spherix Capital; Richard Choo-Beng Lee, Spherix's former president; Roomy Kahn, a California trader who has served as hedge fund consultant; and Gautham Shankar, a proprietary trader at broker-dealer The Schottenfeld Group.
The SEC today also announced the filing of civil insider trading charges in connection with the case.
