Monday, October 19, 2009

Indian-Americans Face Insider Trading Charges

Two prominent Indian-Americans, along with a Sri Lanka born billionaire, have been charged in what U.S. prosecutors say is the biggest insider-trading case in a generation. The scandal is now reverberating in South Asia, particularly the island nation of Sri Lanka.

It is estimated that billionaire Raj Rajaratnam, the founder of hedge fund Galleon Group under arrest in New York on charges of insider trading, has invested more than $150 million in Sri Lankan shares. Even rumors of his trades can send the market up or down. Born in Sri Lanka, he was educated at the prestigious Wharton business school in Pennsylvania and went to set up a hedge fund for boutique investment bank Needham. The hedge fund was spun off with Mr Rajaratnam at its head in 1997. Galleon was well known for its extensive research reports, according to the New York Times, and for having many senior technology executives as its investors.

In 2007, there was a minor scandal involving accusations of insider trading against Pakistani-American Atiq Raza, but it was settled out of court with the SEC when Mr. Raza agreed to pay $3 million fine. Under the terms of the agreement, Mr. Raza was also barred from serving as an officer or director of a public company for five years, and he was permanently enjoined from future violations of the federal securities laws.

The Wall Street Journal reports that fears about the future of Rajaratnam's and Galleon's investments in Sri Lanka caused a major selloff Monday. After losing about 3% during early trading, the Colombo Stock Exchange benchmark All-Share Price Index ended the day at 3082.91, down 1.6%. Shares in which Mr. Rajaratnam or Galleon hold major stakes were among the biggest losers.

Mr Rajaratnam is estimated to be worth about $1.3bn by Forbes magazine. Galleon, the hedge fund he founded, had managed up to $7bn in assets. He was investigated by the Federal Bureau of Investigation in 2007 for allegedly funding the Tamil Tiger rebel movement in Sri Lanka, the Central Bank of Sri Lanka said on Monday.

He was among several wealthy Sri Lankans who donated to the US-based charity, the Tamil Rehabilitation Organization, which may have been funneled to the Tamil Tigers.

In addition to Sri Lankan Raj Rajaratnam, 52, the accused include two Indian-Americans, Rajiv Goel, 51, of Los Altos, of Intel's treasury department, and Anil Kumar, 51, of Santa Clara, an executive at the global consulting group McKinsey & Co. Both were rising stars in the high-tech constellation of Silicon Valley. Locally established and internationally connected, the two men's work and reputations stretched to India and back, as they moved in the rarified air of global big business, according to a report in San Jose Mercury News. Kumar and Goel are both charter members of TIE, the Indus Entrepreneur, an organization of mostly Indian-Americans in Silicon Valley.

Goel and Kumar supplied information about their portfolio firms or clients to co-conspirators, according to the complaint, who in turn made profitable trades. Kumar was arrested in New York, then later released on a $5 million bond, while Goel appeared briefly before a federal judge in San Francisco Friday before reportedly posting a $300,000 cash bail and a $100,000 bond. Both of them have been put on leave by their respective firms. The investigation is likely to lead to insiders at several other firms beyond Intel, IBM and McKinsey.

In India, where Kumar had been heavily involved in the Indian School of Business, embarrased officials announced he had voluntarily taken an indefinite leave of absence from the board because of the scandal.

And like Kumar, Goel's Indian roots were deep. Before joining Intel, he worked in finance for one of India's largest business house, the Aditya Birla Group. With an MBA from the Wharton School, he also served as a corporate banker with Bank of America in San Francisco and managed a large portfolio of securities for Metropolitan Life out of New York, according to Mercury News.

The lead prosecutor Preetinder S. Bharara, the US Attorney for the Southern District of New York, also of Indian descent, said “This is not a garden-variety insider trading case." He alleged that the scheme made more than $20 million in illegal profits since 2006. According to the NY Times, Bharara, 40, was born in Ferozepur, India, and he was an infant when his parents immigrated to the United States in 1970. He grew up in Monmouth County, N.J., and graduated from Harvard in 1990 and Columbia Law School in 1993. A rising star in the Democratic Party, Bharara supervises over 200 lawyers who prosecute high-profile cases in New York City.

There have been other recent white collar crime cases against Indian-Americans. Earlier this month, an Indian-American lawyer in Los Angeles, Sandeep Baweja, 39, agreed to plead guilty to two felony charges relating to a scheme where he took more than $2 million awarded in a class action suit and lost it all on the stock market.

Last year, Vijay Taneja, an Indian-American investor and producer of Bollywood movies, was convicted of mortgage fraud in the United States.

This is, indeed, a sad day for many people of South Asian descent in the United States, particularly in Silicon Valley. Let's hope the accused receive a fair trial amidst the wave of negative publicity surrounding the case.

Related Links:

Haq's Musings

Atiq Raza Pays Fine, Settles Insider Trading Charges

US Mortgage Fraud Funds Bollywood

Insider Scandal Hurts Sri Lanka Stocks

Murder-Suicide in Silicon Valley

Bigotry Bedevils Silicon Valley Eatery

Pakistani-American: Mr. Thirty Percent of Silicon Valley


Anonymous said...

Greed has no caste, creed or religion. Materialism has pushed people beyond the moral lines and everything is justified if you are not caught or u can walk away with murder. There are cases of many indians who have been caught in this race and final reach to their logical conclusion of crash.

Anonymous said...

oh great. a muslim lady screwed Raj.
Good job.

Riaz Haq said...

Anon: "oh great. a muslim lady screwed Raj.
Good job."

I don't think religion has anything to do with it. She is just trying to save her own skin, hoping for a lighter sentence as one f the accused.

BTW, the guy prosecuting her (a Muslim name) and others, including Hindus, Jews and Christians, is also an Indian-American with a Sikh father and Hindu mother from Punjab.

Zen, Munich, Germany said...

"oh great. a muslim lady screwed Raj.
Good job."

If Raj the Billionaire makes crime a habit to gain a paltry 20 mill. (and also to lose 30 mill. in AMD trade), Muslim lady is just a coincidence. Sooner or later, he would have been caught

Riaz Haq said...

A recent Wall Street Journal report is implicating Rajat Gupta, a prominent Indian-American and former head of McKinsey in Galleon's insider trading scandal.

Here's the report:

Mr. Gupta, 61 years old, is one of a number of individuals who received letters from the government saying their conversations had been intercepted in phone calls through wiretaps and consensual recordings made by witnesses in the case.

No criminal charges or allegations have been filed against Mr. Gupta, nor is there any indication investigators are looking at his own stock trading. A spokesman said: "Mr. Gupta is unaware of any examination of any such issue and has done nothing wrong."

Mr. Gupta has served on the board's audit, compensation, corporate-governance and nominating committees. His term as a Goldman director ends in May.

In a March 19 release about Mr. Gupta's decision, Goldman Chief Executive Lloyd Blankfein said: "Rajat has made important contributions to Goldman Sachs as a board member," adding that "his independent advice, keen understanding of the issues and belief in our culture has had a tremendous impact on our firm."

Mr. Gupta had told Goldman in September 2008 that he didn't want to stand for re-election to its board but that Goldman officials persuaded him to remain in the post because of the turmoil in the markets, according to Mr. Gupta's spokesman. Goldman declined to comment.

In a March 22, 2010, court filing, the government told Mr. Rajaratnam's lawyers that its investigation was continuing and that it anticipates its "review of information will lead to further evidence relating to the charged crimes, including identification of additional uncharged co-conspirators."

In the filing, the government listed Goldman among 22 stocks in which it said it was scrutinizing trades by Mr. Rajaratnam and others involved in the case. The government said it was focusing on trades in shares of Goldman between June 2008 and October 2008, the height of the financial crisis, when the Wall Street firm's shares were gyrating because of fears about the prospects for the banking business.

Riaz Haq said...

Here's more on former McKinsey chief Rajat Gupta in today's Wall Street Journal:

NEW YORK—A federal prosecutor said that a former Goldman Sachs Group Inc. director was part of an alleged insider-trading conspiracy with Galleon Group founder Raj Rajaratnam.

The statements at a court hearing Friday were the first time federal prosecutors had publicly cited the involvement of the former Goldman director, Rajat Gupta, in the alleged scheme.

Earlier this past week, the Securities and Exchange Commission filed a civil administrative action against Mr. Gupta for allegedly sharing inside information with Mr. Rajaratnam when Mr. Gupta was a member of the boards of Goldman and Procter & Gamble Co.

Assistant U.S. Attorney Jonathan Streeter said that "the government is going to show on at least two occasions that Mr. Gupta attended Goldman Sachs board meetings" and that "within minutes of the meetings, he called Mr. Raj Rajaratnam."

Following the calls, Mr. Rajaratnam bought or sold his Goldman stock, Mr. Streeter said.

The alleged inside information included details before the public announcement of a $5 billion investment by Warren Buffet's Berkshire Hathaway Inc. at the height of the financial crisis in September 2008 and Goldman's first reported loss as a public company in fall 2008.

Mr. Rajaratnam allegedly bought "hundreds of thousands of shares" of Goldman Sachs within minutes of receiving the call regarding the Berkshire investment, Mr. Streeter said.
The revelation was part of a hearing over objections to wiretapped telephone calls that prosecutors intend to play at Mr. Rajaratnam's trial on conspiracy and securities fraud charges, which begins next week. Mr. Rajaratnam has denied wrongdoing. At least one call prosecutors intend to play was between Mr. Gupta and Mr. Rajaratnam, but occurred in July 2008 before the alleged leaks. Mr. Rajaratnam's lawyers have objected to that call being played at trial.

"These allegations first made by the SEC are totally baseless. Mr. Gupta's 40-year record of ethical conduct, integrity, and commitment to guarding his clients' confidences is beyond reproach," said Gary Naftalis, Mr. Gupta's lawyer. "Mr. Gupta has done nothing wrong and is confident that these unfounded allegations will be rejected by any fair and impartial fact finder. There is no allegation that Mr. Gupta traded in any of these securities or shared in any profits as part of any quid pro quo. In fact, Mr. Gupta had lost his entire $10 million investment in the GB Voyager Fund managed by Rajaratnam at the time of these events, negating any motive to deviate from a lifetime.

Mr. Gupta, the former head of consulting firm McKinsey & Co., hasn't been charged with any criminal wrongdoing.

The Wall Street Journal, citing people familiar with the matter, reported that Lloyd C. Blankfein, Goldman's chief executive, has agreed to testify at the trial in order to establish that information about Goldman was shared with board members, including Mr. Gupta.

Raj Rajaratnam is among 26 people charged in broad criminal insider-trading probe. Nineteen people have pleaded guilty in the probe.

On Friday, prosecutors also gave a preview of their case, saying the first two witnesses will be a Federal Bureau of Investigation agent and Anil Kumar, a former McKinsey consultant and a cooperating witness in the case.

Prosecutors indicated that they planned to play recorded telephone conversations between Mr. Rajaratnam and Mr. Kumar, as well as conversations between Mr. Rajaratnam and his employees and with his younger brother, Rengan Rajaratnam.

Mr. Streeter, the prosecutor, said they intend to show at trial that Rengan Rajaratnam was a Galleon employee during the conspiracy and a co-conspirator. No criminal charges have been disclosed against him.

Riaz Haq said...

For those readers who don't know Rajat Gupta, here's how Newsweek describes him:

Rajat Gupta…stands to lose powerful friends and worldly influence. Few climbed higher than Gupta, the former managing director of consulting powerhouse McKinsey & Co. As a Goldman board member, Gupta, 62, is said to have phoned hedge-fund baron Raj Rajaratnam right after a crucial board meeting during the financial meltdown to tell his pal that Warren Buffett was supplying $5 billion to prop up the bank. Rajaratnam’s fund netted $900,000 overnight thanks to the tip. The SEC has filed a civil suit, though Gupta says he’s done nothing wrong.

Anxious India…stands to lose a national hero. Born and schooled in India, Gupta was widely celebrated in his home country, where he established a new business school in 2001 and has had the ear of Prime Minister Manmohan Singh. An admirer once compared Gupta to the philosopher and priest Thomas Aquinas. “It’s a bit of a disappointment when one of your heroes has fallen,” a former chief executive of Procter & Gamble India told the Financial Times. Those watching the trial from the subcontinent and looking for a local hero might root for Preet Bharara, the Indian-born U.S. attorney who is prosecuting the case.

Riaz Haq said...

Here are some tidbits of gossip by Galleon scandal defendants caught on tape and reported by WSJ:

During the July 29, 2008, call, Messrs. Rajaratnam and Gupta deride Mr. Kumar's aptitude for doing investment deals. "I'm getting a feeling that he's trying to, a mini-Rajat, right?" Mr. Rajaratnam says on the tape. "Without bringing anything new to the party, right?"

"Yeah, yeah," says Mr. Gupta, who previously oversaw Mr. Kumar as managing director at McKinsey.

Mr. Kumar had testified that Mr. Rajaratnam had given him more than $2 million through offshore accounts for inside information on McKinsey clients.

"Honestly, Rajat, I'm giving him a million dollars a year for doing literally nothing," Mr. Rajaratnam tells Mr. Gupta on the July 2008 call.

"I think you're being very generous," Mr. Gupta replies. "But he should sometimes say thank you for that, you know?"

In the same conversation, Mr. Gupta called fellow Goldman directors "an opportunistic group," saying that though they believed commercial banking was a low-return business, they might buy Wachovia Corp. if it were "a good deal."

At other times, Mr. Rajaratnam turns around and talks about Mr. Gupta. In a May 28, 2008, call, Mr. Rajaratnam gossiped with Mr. Kumar about how Mr. Gupta had overextended himself with corporate board positions and other responsibilities.

"You know that his family suffers," Mr. Rajaratnam says on the tape. "I asked him, 'So are you outsourcing your wedding or how are you doing it?'" Mr. Gupta's daughter was married a few months later, according to online photos of the event.

In an Aug. 15, 2008, call, Mr. Kumar speculates that Mr. Gupta is being "greedy" by pursuing a possible job at a private-equity firm run by wealthy investor Henry Kravis, so he can be "in that circle."

"That's a billionaire circle, right?" asks Mr. Rajaratnam. "Goldman is like the hundreds-of-millionaires circle." Mr. Rajaratnam then suggests Mr. Gupta wants to make $100 million "without doing a lot of work."

Messrs. Rajaratnam and Kumar also speculate about Mr. Gupta's "personal family crisis," and discuss his wife's unhappiness with his travel schedule and gossip about another couple's marriage as they make plans to meet for dinner at Manhattan's posh Nobu restaurant.

Riaz Haq said...

Here's a BBC report on the trial proceedings:

A former Intel executive has said that he passed company information to his friend Raj Rajaratnam in the biggest Wall Street insider-trading trial in decades.

Rajiv Goel made the claims as a witness for the prosecution.

Former billionaire hedge-fund manager Mr Rajaratnam is accused of making more than $45m (£28m) by illegally trading on insider information.

Mr Rajaratnam denies all charges.
Close ties

Mr Rajaratnam was arrested in October 2009, and has been freed on bail of $100m.

Should he be found guilty then he may face a prison sentence of more than 20 years.

Prosecutors have called the case the "largest hedge fund insider trading case in history".

They claim that Mr Rajaratnam used a network of contacts to get information that allowed him to make illegal profits from stock trades.

Mr Goel is described as a close friend of Mr Rajaratnam who told him the details of a business deal days before they became public knowledge.

"I was afraid I was doing something where, if it turns out to be wrong, it will have a bearing on the friendship," Mr Goel said in a Manhattan court room.

So far more than two dozen people have been criminally or civilly charged in the case.

They include staff at some of America's biggest companies, including IBM and Intel.

As of now, 19 have pleaded guilty.

Riaz Haq said...

Indian-Americans are being scrutinized by the IRS for tax evasion, according to a NY Times report:

Last July and September, the Justice Department mailed “target” letters to around 50 Indian-Americans with offshore bank accounts, telling them that they were under scrutiny for suspected offshore tax evasion through accounts in India, Mr. Horn said.

Credit Suisse and Swiss cantonal banks are also under scrutiny. Robert Katzberg, a white-collar criminal defense lawyer in New York, said that the pressure on HSBC showed that “the fallout of the UBS scandal, which still has far to go within Switzerland, has spread to other countries.”

The request, made in court papers filed in the Federal District Court in San Francisco, seeks to force HSBC’s main United States affiliate, HSBC Bank USA, to turn over details of accounts held by wealthy Americans from 2002 through 2010 through the bank’s affiliate in India, HSBC India. Approval from a federal judge is required before the Internal Revenue Service can issue the summons.

HSBC Bank USA operated representative offices for HSBC India under the name N.R.I. Services — N.R.I. stands for Non-Resident Indian — in New York and Fremont, Calif., according to court documents. The offshore private banking services were offered to people of Indian origin living outside of India.

In a statement, HSBC said that “while we haven’t seen the summons, HSBC does not condone tax evasion and fully supports the U.S. efforts to promote appropriate payment of taxes by U.S. taxpayers.”

It continued, “While complying with the law in all the jurisdictions in which it operates, including India, HSBC cooperates with requests from U.S. authorities.”

The statement added: “We have been engaged in a constructive dialogue with U.S. authorities. We hope any ‘I.R.S. Summons’ issues can be resolved expeditiously.” A bank spokeswoman, Juanita Gutierrez, declined to comment further.

HSBC is one of the biggest banks for clients from India, China, Hong Kong, Singapore and elsewhere in the East, according to top tax lawyers. In 2007, the bank said in a press release announcing the opening of its N.R.I. office in Fremont, Calif., that it served more than 160,000 non-resident Indians worldwide.

The release announced a “new banking solution” for nonresident Indians “that allows the N.R.I. community to conduct cross-border banking transactions.” In 2003, after the technology bubble, Merrill Lynch estimated that there were 200,000 millionaires of Indian origin in the United States alone, part of the explosion of wealth among Indians in recent years.

In January, federal prosecutors indicted a former HSBC client, Vaibhav Dahake, who was born in India and became a naturalized American citizen in 2006. Mr. Dahake, according to court papers, told prosecutors that HSBC had sought out wealthy Indian-Americans for undeclared offshore banking services through N.R.I. Services. The bank was not identified in the papers but was confirmed at the time as HSBC by people close to the matter.

Mr. Dahake, according to his indictment, told prosecutors that his banker had told him that no United States disclosure forms were required, that the account was not taxable in India and that no forms reporting the interest income would be filed with the I.R.S.

Holding a foreign or offshore account is legal, but American citizens and residents must file annual disclosures with the I.R.S. for accounts with more than $10,000.

Mayraj said...

Earlier this year, Raj Rajaratnam, founder of the Galleon Group hedge fund, was convicted of conspiracy and securities fraud in one of the biggest insider-trading cases in the history of Wall Street. But there was another reason the federal government was interested in Rajaratnam—his alleged financial support for Tamil separatists in Sri Lanka, whose cause is spearheaded by the ferocious Tamil Tiger terrorists. Vanity Fair’ s David Rose gets the untold story from a Tamil Tiger turned F.B.I. informant.

See also:
U.S. Prosecutors ‘Close to Charging’ Rajat Gupta, WSJ Reports
How Rajat Gupta corrupted McKinsey
Did millionaire Rajat Gupta suffer from billionaire envy?
Rajat Gupta: Bigger Than Madoff?
Mean Street: The Disgrace of Rajat Gupta
How Rajat Gupta Came Undone
The former McKinsey head was a gilded member of the corporate elite. But a tape of his voice, divulging secret details of a Goldman board meeting to a convicted hedge fund manager, cost him what no amount of money can buy
The Tempting of Rajat Gupta

Mayraj said...

Rajaratnam and Gupta seem to indicate South Asian culture of corruption is alive and well in West!
These people were already rich and had good reputations.They didn't need to do this sleazy behavior.
Former Goldman Sachs director caught up in Wall Street's biggest insider trading scandal 'to surrender to FBI'

Read more:

Riaz Haq said...

Here's WSJ on Silicon Valley VC gender bias trial:

A decade after hiring Ellen Pao as his technical chief of staff, prominent venture capitalist John Doerr faced her in court Tuesday, defending Kleiner Perkins Caufield & Byers against Pao’s claims of sex discrimination and retaliation.

In more than five hours of testimony, Doerr retraced Pao’s trajectory through Kleiner Perkins, from a staffer who described herself as his “surrogate daughter,” to a disgruntled junior partner who felt she was repeatedly snubbed for promotions and choice assignments.

With Pao’s mother watching from the front row, Doerr said he wanted Ajit Nazre, a Kleiner Perkins partner who engaged in a consensual affair with Pao in 2006 to be fired. The trial is taking place in San Francisco Superior Court.

Doerr said he ultimately agreed that Nazre not be fired because other partners wanted to keep him and because Pao and Nazre said they could work together.

“You relented,” Pao’s attorney, Alan Exelrod, said. “That was a factor,” Doerr said. But, he added, the firm told Nazre, “if he did this again he’d be terminated.”

Kleiner Perkins partners reduced Nazre’s bonus in 2007 as punishment for the affair. “But his biggest punishment was that I told him I’d lost confidence in his ability to be a leader of the firm, and he’d have to regain that confidence,” Doerr told Exelrod.

The following year, Nazre was promoted to senior partner, even though Doerr said he had reservations about Nazre’s trustworthiness. “I don’t remember how I voted, but the partnership voted, and [Partner Emeritus] Ray Lane was a strong supporter,” Doerr said.

Doerr hired Pao in 2005 as part of what Doerr called “Team JD,” which meant she helped him manage his time. Early on, he gave her advice on areas where the firm though she could improve. Pao tended to be dismissive and had conflicts with other partners, Doerr said, including with another female partner, Trae Vassallo.

Nonetheless, he praised her work. “You have contributed extensively and I’m delighted that you chose to join KPCB,” her first review said.

After a couple of years, Pao became less happy at the firm and talked to Doerr about leaving. She offered suggestions on ways that Kleiner Perkins could improve. “Honesty with partners,” was one suggestion, according to a document shown in court. “Quality in our work” was another.

In June 2007, Pao told Doerr about the affair with Nazre. She also complained that a third partner, Randy Komisar, had given her a book of poetry on Valentine’s Day and asked her out to dinner when his wife was out of town.

Doerr told Exelrod that it was common to give gifts at the firm and he didn’t ask why Pao would be upset about the book.

In 2009, he still thought highly enough of her that he thought the firm should work hard to keep her when she got an offer from a rival firm, Google Ventures GOOGL -1.08%.

She would be given “more carry, comparable income and be given more responsibility in a lesser firm, and if I were them I would seize the opportunity to hire her,” he wrote in an e-mail to partners Ray Lane and Ted Schlein.

Schlein offered Pao a position on the digital investing team and she decided to stay at Kleiner Perkins. But problems developed there too. Pao had urged Kleiner Perkins to invest in patent firm RPX, which it did. But the board seat, which Ms. Pao wanted, went to Komisar.

“Did you tell her that Randy needed a win?” Exelrod asked Doerr.

“I told her her job as a junior partner was to support the KP team and Randy and if she couldn’t do that she should do something else,” Doerr said.

“Didn’t you say he needed a win?” Exelrod asked.

“Randy and Kleiner needed a win. Everybody needs wins. I could use some wins,” said Doerr, with a smile.

Doerr said he introduced Pao to his family, met her family, coached her and hired coaches for her, including a speech coach so she could learn to communicate better with other partners and advance her ideas.

Riaz Haq said...

#Harvard educated, #GoldmanSachs alum #Indian-#American #Muslim VC charged with insider trading.Flees to #India

A boyish 43 years old, Iftikar Ahmed ticked every box of the immigrant success story, going from Harvard Business School to Goldman Sachs Group Inc. and then landing as a partner at one of the oldest venture-capital firms in the country. He and his wife owned a mansion in Greenwich, Conn., and two apartments on Park Avenue in Manhattan, and gave large sums to local and Indian charities.

Yet before Mr. Ahmed fled the U.S. in May, he allegedly stole $65 million through a series of frauds that prosecutors and regulators said became increasingly brazen over the years and that exploited the trust-based culture of the venture-capital firm, Oak Investment Partners. Regulators said Mr. Ahmed began to commit fraud within months of joining Oak in 2004.

Mr. Ahmed’s former colleagues at Norwalk, Conn.-based Oak found that he used doctored deal documents, phony exchange rates and fake invoices to siphon off millions of dollars into secret bank accounts, according to prosecutors and regulators. Oak made the discoveries only after Mr. Ahmed was arrested on insider-trading charges unrelated to his work at the firm.

In a civil lawsuit in May against Mr. Ahmed alleging fraud, the Securities and Exchange Commission said there were at least nine companies in which Mr. Ahmed allegedly manipulated Oak investments to enrich himself.

Massaging Figures
In December, Mr. Ahmed persuaded fellow Oak partners they should pay $20 million for a $2 million stake in a Hong Kong-based online retailer, pocketing the $18 million difference, the government alleged.

Oak executives later testified that they didn’t learn of the actual $2 million sale price until after Mr. Ahmed’s arrest, even though the seller disclosed it in a news release, according to court filings and people familiar with the matter. Oak executives said they also found Mr. Ahmed had massaged financial projections for the Hong Kong company, adding a “1” in front of the revenue figure, to make its sales appear far healthier than they were, according to court documents.

Oak officials didn’t independently verify much of the information Mr. Ahmed provided them, according to court documents and testimony as part of the SEC fraud case. Grace Ames, Oak’s chief operating officer, told a federal court in July: “There is a basis of trust that’s required within the partnership.”

The SEC and prosecutors didn’t name any companies involved, but the Hong Kong retailer was Giosis Mecox Lane, according to people familiar with the matter.

A representative of Giosis Mecox Lane, which sells apparel and lifestyle accessories, couldn’t be reached for comment. A representative of Mecox Lane Ltd., the company that sold its stake to Oak, declined to comment.

Arrest and Flee
After Mr. Ahmed was arrested in May on federal insider-trading charges, he surrendered U.S. and Indian passports, according to court records. In May, he fled the country using an expired passport, according to court documents. He is now a fugitive. Mr. Ahmed couldn’t be reached for comment.

Mr. Ahmed is believed to be in India, according to his lawyer, Alex Lipman. The former executive needs authorities’ permission to leave India, after being held in prison for 61 days until July 23 for allegedly entering the country illegally, Mr. Lipman said. He faces a prison sentence of up to 20 years in the U.S. if convicted of insider trading.

In the U.S., the venture-capital industry is still agog over the plight of Mr. Ahmed, known as “Ifty” to friends and colleagues.

Riaz Haq said...

'Black Edge' Recounts The Biggest Insider-Trading Scandal In History

Well, Sheelah Kolhatkar, welcome to FRESH AIR. First, tell us about this guy, Steve Cohen. What made him distinctive and unique?

SHEELAH KOLHATKAR: Well, Steve Cohen is a legendary figure on Wall Street, largely for his prowess as a trader. So he made billions of dollars, one of the largest fortunes in the United States, almost completely on the basis of his ability to sort of sit in his chair, look at the market screens and trade based on his gut and what he saw was going on. And, you know, he has the lifestyle to reflect all that. He lives in a 36,000-square-foot house in Greenwich, Conn. There's an ice rink and a Zamboni for the ice rink. He decorates his office and his home with artwork of the sort you'd expect to see in the Museum of Modern Art.

And, you know, he really has a sort of rags-to-riches story that people in the financial world love. He grew up very middle-class in Long Island. They were certainly not poor, but they were not wealthy. And I think that growing up, he was surrounded by a lot of affluence in Great Neck. And he was motivated early on to make money. He was a very, very talented poker player in high school. And then he went off to Wharton, studied business there. And then he launched his hedge fund, SAC Capital, in 1992 with $25 million and very quickly achieved enormous success.

DAVIES: There are a lot of jobs in the financial sector, and it's confusing to people. There are bond traders and stock traders and people who are in - work for investment banks and private equity people. Steve Cohen made his fortune with a hedge fund. What is a hedge fund?

KOLHATKAR: Hedge funds were originally conceived as these very sort of bespoke products that catered to wealthy investors. So if you were a very rich person, you know, a CEO of a company, you had a vast fortune, you were trying to figure out how to manage all that money, you might have parked a slice of it in a hedge fund where the idea was that it would be sort of protected from the general swings of the market. So you would be paying very high fees to a hedge fund manager, and in exchange you were granting that person flexibility to sort of invest the money however they saw fit.

And because hedge funds only accepted money from very wealthy and sophisticated investors, they were given a longer leash by the regulators to take risks in the market. They were allowed to borrow money to invest at much higher levels than a regular mutual fund, for example. They were allowed to short stocks, which is essentially borrowing a stock and selling it and betting that it will go down. It's actually a very high-risk activity. Not everyone does this. But hedge funds, because they were only taking money from investors who could afford to lose the money, they were given this extra freedom. And in exchange, they charged very high fees.

And, you know, over time they came to really dominate the financial market. They were so successful and made so many people so wealthy that they have become this very dominant force. And in fact, what they do affects everyone.

Riaz Haq said...

#Americans duped into losing $10 billion by illegal #Indian call centers in 2022. Most of the victims of these #fraud calls from Indian phishing gangs were elderly #US citizens above the age of 60 years, according to #FBI. #India @deccanherald

After several incidents were reported in 2022, the FBI has now deputed a permanent representative at the US embassy in New Delhi. The representative will work closely with the CBI, Interpol and the Delhi Police to bust these gangs that have put India under the threat to be termed as the hub of such illegal call centres.

Americans lost a total of $10.2 billion in 2022 so far, which is a 47 per cent increase from 2021’s $6.9 billion, to such fraud calls. FBI’s South Asia head Suhel Daud told the publication that "romance-related" frauds reported were worth Rs 8,000 crore in 2021 and Rs 8,000 crore in the last 11 months of 2022. Losses due to "tech support" crimes were as much as $3 billion in the last two years – $347 million in 2021 and $781 million in 2022 so far.

“It may not be a national security concern yet, but the reputation (of a country) is involved, and we don’t want India to suffer on that count,” Daud told the publication. He also noted that the FBI’s website has registered 8.5 lakh complaints in 2021 and over 7.8 lakh complaints so far in 2022 in regard to internet crimes. Those complaints included cyber crime related to investment ($3 billion), business email compromise ($2.4 billion), personal data breach ($1.2 billion), romance($1 billion) and tech support ($781 million).

Riaz Haq said...

#Indian-#American driver Dr. Dharmesh Patel arrested after intentionally driving #Tesla off a cliff. Patel's wife and their 2 children, a 7-year-old girl and a 4-year-old boy, were trapped in the vehicle when emergency responders arrived. All 4 survived.

Riaz Haq said...

Prateek Gupta: The Big Indian Defaulter behind a $500 Million International Commodities Fraud

We take great pride in the fact that many successful Indians are occupying corner offices at the world’s largest and most powerful corporate houses and every action of theirs makes news in India. The flip side is that people of Indian origin will also hit the headlines for zip and enterprise of another kind—for gigantic fraud, running mega scams and even market manipulation. These stories are buried in tiny reports and rarely make it to front pages or television debates.

For instance, how many of us remember that the ‘Flash Crash’ of 6 May 2010, which wiped out a trillion dollars in five minutes, was the handiwork of a young, reclusive Indian called Navinder Singh Sarao, trading alone out of west London. Those who want to know the fascinating details should read Flash Crash by Liam Vaughan who describes the global manhunt to catch Sarao, characterised as a ‘trading savant’.

Another Indian who is making news abroad, but doesn’t figure on our media channels, is Prateek Gupta of Ushdev International Ltd, despite his history of cheating several banks in India. He has recently acquired the dubious cred of having cheated Trafigura, a global commodities trading giant, of a whopping US$577mn (million) in a nickel deal. This is when his admitted dues to Indian banks were over Rs3,500 crore and total liabilities around Rs4,205 crore. He was being investigated by the central bureau of investigation (CBI).

So what is Prateek Gupta’s story? Let’s start with why he is in the news today.

Trafigura Scammed of US$500 Million
On 9th February, the global commodity trading giant Trafigura group Pte issued a press release which said it had “discovered a systematic fraud committed by a group of companies” to the tune of US$577mn by companies controlled by Prateek Gupta, in connection with a deal to purchase about 25,000 tonnes of ‘containerised nickel’. Trafigura had entered into a ‘transit finance’ deal, or what would be called a ready-forward deal, where it would buy nickel from companies connected to Mr Gupta and sell them back to the same companies in future at a higher price that covers interest cost.

Sometime after October 2022, Trafigura inspected eight shipping containers and found that they did not contain nickel or even nickel alloy. As it expanded its inspection to a few hundred containers (out of over 1,100 covered by the deal), it discovered more of the same. Instead of nickel or nickel alloy, whose prices have been shooting up since the Russia-Ukraine conflict, the containers contained carbon steel, whose value is a fraction that of nickel.

The Trafigura group, which operates across commodity businesses, employs 12,000 people across 156 countries, rushed to court in February and obtained a ‘worldwide freezing order’ of US$625mn against Mr Gupta and his companies, led by TMT Metals Holdings Ltd based in London. The London high court order restrained individuals and businesses from dealing with Mr Gupta’s assets anywhere in the world. It is open to challenge by the Gupta group and the hearings will commence soon. Reports in the international media suggest that Trafigura has had a legitimate business relationship with Mr Gupta’s companies since 2015.

Prior to this, Mr Gupta has inflicted even greater losses on Indian public sector banks (PSBs). It would seem that he was building his international commodity businesses through money diverted from the Indian company. He bought TMT Metals AG, a trading firm, in 2016. He also has companies in Singapore, Malaysia and Switzerland.

Riaz Haq said...

How Swami Nithyananda's ‘fake country’ Kailasa fooled 30 US cities with ‘Sister City’ scam? Explained

Sanchari Ghosh

Controversial godman Swami Nithyananda and his fictional country "Kailasa" is in the news again and this time, for duping the city of Newark in New Jersey, United States. Apparently, Newark. admitted to falling victim to a scam that led them to become a "Sister City" with a fake Hindu nation.

The incident occurred when Mayor Ras Baraka invited representatives of Kailasa to Newark City Hall for a "cultural trade agreement," only to discover later that Kailasa was not a real country.

Despite Newark's apparent commitment to partnering with diverse cultures to enrich each other with connectivity, support, and mutual respect, the city reportedly did not realize Kailasa's inauthenticity until after an official ceremony had already taken place.

Footage shows city officials signing documents and taking photographs during the ceremony to become a "Sister City" with "Kailasa."

Following the incident, the Newark City Council reportedly rescinded the agreement just days after signing the "Sister City" agreement papers. One city council member called the oversight "unacceptable" and said it "cannot happen any longer."

Newark is not the only city to sign the ‘Sister City’ deal…
The funny thing is as many as Newark is not the only city to sign this deal with Kailasa. As per the website of the United States of Kailasa, it has as many as 30 cities in the United States. And a Fox report said, most mayors have accepted of signing such deals.

How Kailasa got these cities to sign the deal?
The report cited, that the cities claimed that the ‘proclamation is not an endorsement but a response to a request’. Most of them further confirmed that ‘they did not very the information in the request’.

That means, Kailasa got them to sign the deal simply by requesting them to do so.

What is Kailasa?
'Kailasa' is a self-proclaimed country founded by controversial godman Nithyananda, who purchased an island off the coast of Ecuador and named it after a sacred site for Hindus. 'Kailasa' claims to be a movement founded by members of the Hindu Adi Shaivite minority community from Canada, the United States, and other countries. It offers a safe haven to all the world's practicing, aspiring, or persecuted Hindus.

However, 'Kailasa' is not recognized as a country by the United Nations or the international community, and it is considered a micronation. Despite this, the 'Kailasa' movement maintains a strong social media presence and claims to have various departments, including treasury, commerce, sovereign, housing, and human services, as well as a flag, a constitution, an economic system, a passport, and an emblem.