Insider trading is an interesting crime. Essentially a person buys or sells public stocks with “inside” or non-public information that gives them the upper hand In the United States and most countries, insider trading is illegal because it as seen as having an unfair advantage. Insider trading deals can make people millions of dollars, at the expense of others. However it is interesting to note that people do not really receive extremely high penalties or prison sentences for this “white collar” crime, and U.S. congressmen are allowed to trade with inside information. In light of that, we are going to examine the largest prison sentences ever received for insider trading.
5. Sam Waksal – 7 years, 3 months
Sam Waksal was the founder of a pharmaceutical drug company called ImClone Systems Inc. which produces a variety of pharmaceutical drugs. Waksal recently came into contact with information that the company would tank due to a failed cancer drug that the firm made. So what did Waksal do? He decided to sell all his shares. It was this particular company that Martha Stewart famously got caught for insider trading as well. Waksal was called under investigation and eventually pleaded guilty and received a jail sentence of 7 years and 3 months.
4. Matthew Martoma – 9 years
At the number 4 spot on our list with a sentence of 9 years, is Matthew Martoma. Martoma used to work as a portfolio manager for the hedge fund SAC Captial. It was there that he received some insider and sensitive information about some pharmaceutical stocks. So he used that information to make some illegal trades which generated $275 million dollars in profit for SAC Capital. He was found guilty and was sentenced to 9 years in prison and a $9.38 million dollar fine.
3. Zvi Goffer – 10 years
Zvi Goffer worked as a trader for Galleon Group who was convicted of insider trading, securities fraud, and conspiracy. He worked under the number 2 man on our list, and was in-charge of a corporate trading scheme to trade ahead of a upcoming corporate merger based on inside and confidential information that he received. He was sentenced to 10 years in prison for his crimes.
2. Raj Rajaratnam- 11 years
Taking our number 2 spot is Raj Rajaratnam who was a billionaire and co-founder of the Galleon Group, where Goffer worked. It would seem that insider trading runs in this company as Rajaratnam was also found guilty for insider trading, securities fraud, and conspiracy. The investigation was one of the longest and most in-depth insider trading investigations at the time. The trial and investigation caused Galleon Group to close its doors. Raj was sentenced 10 years in federal prison and a $150 million dollar fine.
1. Matthew Kluger – 12 years
Matthew Kluger was a former Wall Street mergers and acquisitions lawyer who was involved in a 17 year insider trading ring. He avoided detection for a very long time, however the FBI eventually caught him. Kluger shared sensitive information about his clients to others and eventually lead him to plead guilty to insider trading, securities fraud, and conspiracy charges that landed him a 12 year prison sentence, which is the longest sentence anyone received in history for insider trading.
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