January 22, 2012
Are The Feds Overdoing Insider Trading?
Posted by David Zaring

Bainbridge thinks maybe, and while I think that insider trading has distracted the government from financial crisis proseuctions (might not be a terrible thing, but something must be going on there), I approach the Galleon string of prosecutions with less trepidation.  Those guys were totally trading on inside information!  There's a bitter and a sweet here:

  • The Bitter: if the government thinks expert networks shouldn't be permitted, it should regulate expert networks, rather than do it through criminal proseuctions of hedge funds.  
  • The Sweet: Raj Rajnaratnam didn't exactly have a lot of sympathetic facts going his way (the link is to George Packer's great article on the case).  You want some investors to be seeking an edge, but paying members of boards to report to you with actions about to be taken by the corporation ... that sure seems like corruption to me.

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