Wall Street has had its fair share of scams and those who have taken advantage of investors over the past year or two, and today there was news of another major insider trading scheme. Federal prosecutors are accusing Raj Rajaratnam, the billionaire founder of Galleon Group, as well as five others of the single biggest insider trading scheme ever in the history of hedge funds. The charges allege that Galleon Group, the famous hedge fund, made almost $17 million trading on inside information about PolyCom, Hilton, Akamai, Google, Clearwire, AMD, and PeopleSupport and their corporate results and impending news.

All of the defendants were caught by sophisticated devices such as wiretaps, which is a first time thing for federal prosecutors when it comes to finding insider trading. The prosecutors received court permission on March 7, 2008 to intercept phone calls in Rajaratnam’s cell phone. During the process their seems to have been some very damning evidence, including one call where Danielle Chiesi (another of the accused) tells a co-conspirator they need to keep their mouth shut about the evidence or ”I will be like fuc#### Martha Stewart.” Rajaratnam was ranked the 559th richest man in the world on this past year’s Forbes list.

Prosecutor Preet Bharara said this is the largest insider trading scheme ever and the tactics used were also innovative and show that the government will not let this kind of white collar crime take place. Prosecutors hope that a massive case like this will discourage other money managers from trying to get away with insider trading.

Inside the hedge fund world there was a lot of squirming today as many traders worry that every single thing they say about a publicly traded company could be used against them. Personally, I think the government should only use these methods when they have been previously tipped, as they were in this case. In the long run though, it is good for all investors when insider trading schemes are brought down. This is just another lesson in of how common and real investment scams are. Be very careful out there!