Federal Judge Jed S. Rakoff assessed a record fine of $98.2 million against hedge fund billionaire Raj Rajaratnam of Galleon Group, the largest penalty against a person ever levied in a Securities and Exchange Commission insider trading case.
Altogether, Rajaratnam will be on the hook for $156.6 million, which includes fines and forfeitures assessed at his sentencing in the criminal case brought against him, The New York Times reported on Wednesday.
Robert S. Khuzami, the SEC’s head of enforcement, said of the decision: “The penalty imposed today reflects the historic proportions of Raj Rajaratnam’s illegal conduct and its impact on the integrity of our markets.”
However, the judge was not satisfied, and rejected Rajaratnam’s attorneys’ argument that civil penalties were unwarranted in view of the criminal ones.
“This misapprehends both the nature of this parallel proceeding and the purposes of civil penalties,” Rakoff said in his order. “SEC civil penalties, most especially in a case involving such lucrative misconduct as insider trading, are designed, most importantly, to make such unlawful trading a money-losing proposition not just for this defendant, but for all who would consider it.”
Rakoff’s discontent stems from his dissatisfaction with the SEC’s practice of allowing settlements as a means of enforcement, rather than bringing cases to trial—and rather than bringing contempt charges against companies that violate previous agreements.