From the NYTimes:
The defendants operated in a cozy world of ‘you scratch my back, I’ll scratch your back,’ Preet Bharara, the United States attorney for the Southern District of New York, said on Friday. He added that the case should be a “wake-up call” for hedge fund managers who even think about insider trading. Hedge funds often use lobbyists, investigators and other connected people to dig for information about a company or industry. Most of the information is obtained legally. But the government’s use of wiretapping and confidential witnesses in the Galleon case raises questions about when investors can act on nonpublic information. The pending crackdown, based on at least two years of investigation, targets securities professionals including hedge- fund managers, lawyers and other Wall Street players, the people said, declining to be identified because the cases aren’t public. Some probes, like the one that focused on Rajaratnam, rely on wiretaps. Others stem from a secret Securities and Exchange Commission data-mining project set up to pinpoint clusters of people who make similar well-timed stock investments.
