The 11 Most Shocking Insider Trading Scandals Of The Past 25 Years

The scandal involving i-banker Dennis Levine of Drexel Burnham Lambert (DBL) and arbitrage king Ivan Boesky, brought down several Wall Street titans and DBL - arguably the "richest and most feared firm on Wall Street." Boesky earned $50 million in profits from the tips; Levine's "biggest insider trade" earned him a profit of $2.69 million. It was because "Boesky hit home runs on nearly every major deal in the 1980s - Getty Oil, Nabisco, Gulf Oil, Chevron, Texaco" that the SEC realized something was up.

Source: New York Magazine

In 2001, America's sweetheart, Martha Stewart, sold $228,000 worth of ImClone biotech stock the day after her friend and founder of ImClone, Sam Waksal, sold his shares and told his family to sell out too based on insider information. In '04, Stewart was found guilty of conspiracy, obstruction of an agency proceeding, and making false statements to federal investigators. She went to prison for five months.

Source: New York Magazine

Former Pequot Capital CEO Art Samberg blatantly asked Microsoft employee David Zilkha for insider information about the tech company in several emails during 2001, which then helped net his hedge fund $2.1 million. Samberg settled and paid the SEC $28 million. Pequot, once one of the most famous hedge funds on the Street, was forced to close its doors by mid-2009.

Source: TBI

Australia's most famous banker, Rene Rivikin, was convicted of using confidential, market-sensitive information to earn just $346 on 50,000 Qantas shares he bought in '01 within hours of learning Qantas would merge with Impulse airlines. Rivkin was found guilty in '04, banned from stockbroking for life, sentenced to 9 months jail, all for less than a $400 bonus. He committed suicide in '05.

Source: The Sydney Morning Herald

Former Qwest Communications chief Joseph Nacchio was charged with 42 counts of insider trading linked to him dumping more than $50 million in stock in 2005 (he was convicted in '07 on 19 of those charges), acting on non-public information that the company was in decline.

Source: The Washington Post

Yoshiaki Murakami's hedge fund bought 1.93 million shares in Nippon Broadcasting after he was told that  internet and financial services company, Livedoor, was attempting to gain a 5% stake in the broadcaster. Murakami was arrested in '06 for acting on non-public information that earned him $25.5 million. The wider Livedoor scandal rocked the Japanese economy; the Nikkei tumbled, the stockmarket lost 6% over 2 days, with Livedoor's value plummeting 52% over 5 days.

Source: WSJ and Time

A $15 million scam and the biggest insider trading scandal since Boesky-gate, was allegedly hatched at the Grand Central Oyster Bar. Mitchel Guttenberg, an executive director at UBS, tipped off hedge funds and traders about forthcoming analyst upgrades and downgrades on stocks including Allstate and CVS. David Tavdy and Erik Franklin paid hundreds of thousands of dollars for the tips, earning $4 million from the resulting trades.

Source: New York Post

Billionaire hedge-fund manager and founder of the Galleon Group, Raj Rajaratnam, as well as 19 others allegedly used secret information about public companies to make investments that earned them $60 million in profits. The giant scam involved IBM, McKinsey, Bear Stearns, Goldman Sachs, Google, Berkshire Hathaway and a bunch of traders, lawyers and executives.

Randi Collotta, a former compliance officer for Morgan Stanley, divulged non-public information about four M&A deals to her husband and a Floridian trader, who then passed the information to portfolio managers at a Bear Stearns hedge fund (who incidentally, were also trading illegally on Guttenberg tips). The Collotta's earned $9,000 for their tips, which helped make others $600,000.

Source: MSNBC

The SEC alleges Dallas billionaire brothers, Sam and Charles Wyly, made $31.7 from making bets on Sterling Software which they partially own, that was “massive and bullish” in 1999 after deciding to sell the company. The brothers are also charged with securities fraud for an alleged 13-year scheme that earned them over $550 million by trading in securities of companies on whose boards they served.

Sources: TBI, SEC

Alleged insider trading by a Dr. Yves Benhamou may have allowed FrontPoint's healthcare funds - overseen by Chip Skowron - to avoid $30 M in losses. Benhamou is accused of tipping off FrontPoint when trials for a potential hepatitis drug were unsuccessful (Benhamou worked for HGSI, which makes the drug). The funds then sold 6 million HGSI shares on key dates before negative trial results were announced.

Source: TBI

This scandal, which is effectively the second phase of the Galleon investigation -- there are several connections -- has touched every corner of Wall Street, from banks to hedge funds to expert networks. The FBI believes a plethora of firms and individuals conspired to trade on tech stock including Apple, AMD, Marvell and more, often using information garned from so-called "expert networks." Four hedge funds were raided (three have since shuttered); 50 companies have been subpoenaed; there have been multiple arrests of experts and hedge funders, and hedge fund giant SAC Capital has been mentioned a lot.

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