The New Yorker is one of the best sources of long-form journalism out there. George Packer recently authored an 11,000+ word article on the largest insider trading case in the history of insider trading cases: Raj Rajaratnam’s Galleon hedge fund. Rajaratnam created an elaborate and extensive network of outside consultants and executives at various publicly traded companies that fed him actionable insider information. Insider trading is everywhere you look:
In the language of hedge funds, Galleon’s strategy was to “arbitrage reality” with the consensus on the Street—to find information about a given company that diverged from Wall Street’s view, allowing Galleon to cash in when the company’s stock price rose or fell. At Galleon, this was known as “getting an edge.” The analyst or portfolio manager with the best read on a company was called the “axe” on that stock. The surest way to become the axe was to have a source who passed on information about a company’s earnings, upcoming deals, and other confidential matters. The ultimate edge was insider trading—the acquisition of nonpublic information about a company—and Rajaratnam was the king axe.