New Silk Route's Gupta charged with insider trading

After months of investigation, the India- and MENA-focused firm’s chairman and co-founder has been charged with allegedly providing confidential information to Raj Rajaratnam, founder of hedge fund Galleon.

Rajat Gupta, chairman and co-founder of private equity firm New Silk Route, has been charged by the US Securities and Exchange Commission (SEC) with insider trading.

In a SEC statement, Gupta was alleged to have provided confidential information gleaned from his tenure on the Goldman Sachs and Procter & Gamble boards to Raj Rajaratnam, founder of hedge fund Galleon Management.

Gupta’s tip-offs allegedly included information about the quarterly earnings of both firms and an impending $5 billion investment by conglomerate Berkshire Hathaway into Goldman Sachs during the financial crisis of 2008.

“Gupta was honoured with the highest trust of leading public companies, and he betrayed that trust by disclosing their most sensitive and valuable secrets,” Robert Khuzami, director of the SEC’s division of enforcement, said in the statement.

The charge is the culmination of a long period of investigation in what is reportedly the biggest insider-trading scandal in the hedge fund history. In April last year, the Wall Street Journal reported that the US government was investigating whether Gupta had shared confidential information with Rajaratnam, who made more than $25 million in illicit gains and was also charged with insider trading back in October 2009.

The information Gupta gave to Rajaratnam helped him generate more than $18 million in illegal profits and loss avoidance, according to the statement. Gupta was believed to have “lucrative” business interests with Rajaratnam and was an investor in at least some of the Galleon hedge funds.

Before co-founding New Silk Route with Parag Saxena in 2006, Gupta was formerly a managing partner at McKinsey & Company and its worldwide CEO. He also served as the United Nations Secretary-General’s special advisor on UN Reform.

New Silk Route focuses on investment in South Asia, the Middle East and other emerging Asian economies and currently manages assets of $1.4 billion. It invests primarily in the infrastructure, telecommunications, manufacturing, IT, consumer services and financial services sectors across offices in Bangalore, Dubai, Mumbai and New York. It invested $75 million in Coffee Day Holdings in March last year as part of a consortium that included Kohlberg Kravis Roberts and Standard Chartered Private Equity.

New Silk Route did not respond to requests for comment by press time.