More thrilling news about the Galleon insider trading case come out every day.
The latest is that several media outlets are reporting that the hedge fund paid out $250 million to its banks last year. It is not clear how much of that money may have been in exchange for information, but it is broadly assumed that some of its was.
The FT reports that investment banks may not have given Galleon information that cause charges of insider trading violations. These tips were in the grey area between sharing data a number of traders know and data that very few have access to. The paper writes that on broker reported “They wanted anything the public did not have. They got various pieces and put them together and that was their edge.”
When does an “edge” become a full-blown tip? The SEC and FBI will be left to ponder that as they gather more information and consider more charges.
The little hints that pass between traders and bankers have probably been part of Wall St. since the curb exchanges started in the 19th Century. It is only in the last several decades that there have been efforts to curtail the flow of that information particularly information that might put public shareholders at a disadvantage as they buy and sell stocks
The whispering among the Wall St. elite also raises the issue of whether insider trading is insider trading if no money changes hands? What if Galleon had never paid a dime for any of the tips it got?
No money, no foul? Not really. The ethics of the action are bad no matter what the economics.
Douglas A. McIntyre
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