Galleon used another form of insider information


We already knew that Raj Rajaratnam, the head of the now-liquidating Galleon Group who is worth $1.5 billion and is free after posting $100 million bail, allegedly traded on inside information. But up until Saturday morning, I had thought Rajaratnam's alleged insider information pertained only to company quarterly earnings reports. As the Galleon probe spreads to another hedge fund, it appears a new kind of insider information may have contributed to Galleon's ill-gotten gains.

Thanks to the Wall Street Journal, we now know that Rajaratnam used another, perhaps even more useful form of information: how many shares of a particular stock a major broker is buying or selling at any given time. For example, the Journal reports that Galleon executive Gary Rosenbach forced his Hambrecht & Quist (H&Q) broker to divulge how many shares of a certain stock big firms, like Fidelity Investments, were trying to sell.