Galleon insider trading: An unchecked financial cancer that metastasized

Some cancers are particularly nasty because they spread so quickly through the body. The same can be said for the way insider trading can spread its black wings throughout the financial system. This comes to mind as one contemplates the latest revelations about Galleon Group, the formerly $3.7 billion hedge fund whose founder, Raj Rajaratnam, has been charged in the largest hedge fund insider-trading case ever. Rajaratnam is out on $100 million bail.

The latest news about Galleon does not expose all the new cancer sites -- but it adds some color to what we already knew. Specifically, it reveals how the SEC failed to investigate Galleon in 2001 after a Galleon associate was convicted of wire fraud, even though a concerned JPMorgan Chase (JPM) analyst reported to the SEC that year that something was fishy at Galleon. And "color" is a key word, because it appears that Galleon and its hangers-on used it as code for insidery information, the use of which to trade may have been in violation of insider-trading laws.