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The Galleon Group was one of the largest hedge fund management firms in the world, managing over $7 billion, before closing in October 2009. The firm was the epicenter of a 2009 insider trading scandal which subsequently led to its fall. Galleon Clients Abandon Ship. The Wall Street Journal, October 21, 2009
The firm was founded by Ari Arjavalingam, Gary Rosenbach, Krishen Sud, and Raj Rajaratnam, a former equity research analyst and eventual president of Needham & Company, in 1997. The New York headquartered firm was named for the galleon, a large sailing ship used from the 16th to 18th centuries by European traders and explorers, especially from Spain.
The rise and fall of Galleon has been the subject of a number of books including The Billionaire's Apprentice (by Anita Raghavan, a journalist with The Wall Street Journal).
Other former and current traders at Galleon were subsequently arrested and charged with contributing to the alleged conspiracy. Several former employees of the firm cooperated in the investigation. As of January 2012 over 50 people had been convicted or pleaded guilty in the sprawling probe stemming from Galleon (not all of them Galleon employees).
Zvi Goffer, a former Galleon trader, was found guilty of all 14 counts of conspiracy and securities fraud against him and sentenced by Judge Sullivan "to 10 years in prison for his role in a scheme to trade on inside information provided by lawyers". Goffer had asked for a lenient sentence and prosecutors had recommended more than 10 years.
Adam Smith, a former Galleon trader, pleaded guilty and cooperated in the criminal trial of Raj Rajaratnam. He was sentenced in June 2012 to only a period of probation and no jail time by Judge Jed Rakoff, who took over the case from Judge Richard Holwell when the latter retired from the bench.
David R. Slaine, a former Galleon trader, who had previously been a portfolio manager at the hedge fund Chelsey Capital, and, prior, a trader at Morgan Stanley, was sentenced to three years' probation in January 2012, having provided vital assistance to the government as an FBI informant, since 2007. "Galleon Official Is Spared Prison", The New York Times, June 26, 2012. Retrieved July 30, 2019. "Probation for a Former Galleon Group Employee" Bloomberg News, January 20, 2012. Retrieved July 30, 2019. "Insider trading case of 2007 led to Galleon", by Grant McCool, Reuters, February 4, 2010. Retrieved July 30, 2019.
Testimony during the trial of illegal inside source Rajat Gupta revealed further detail of how insider trading was pervasive at Galleon. Leon Shaulov, a Senior Portfolio Manager who was left out of one particular insider trading scheme, was livid when he found outnot because the company was breaking the law, but rather because he had been left out, sending internal emails complaining: "Thx for the heads up"; "Not one word from anyone. Thanks very much. All I get is sick dilution."; "What I give vs what I get back is disgusting." Shaulov went on to found Maplelane Capital.
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