Judge Jed Up SEC's Ass Again

These days, Judge Jed Rakoff’s name creates about as much agita inside the SEC as as Bernie Madoff. If Wall Street’s cops on the beat didn’t have enough to deal with already, now Judge Jed is up their ass about a seemingly meaningless legal settlement in the Galleon insider trading case.

Author:: Zachery Kouwe
Updated:: Jan 14, 2019
Original:: Apr 6, 2010

These days, Judge Jed Rakoff’s name creates about as much agita inside the SEC as as Bernie Madoff. If Wall Street’s cops on the beat didn’t have enough to deal with already, now Judge Jed is up their ass about a seemingly meaningless legal settlement in the Galleon insider trading case.

Before approving the pact between the SEC and the Schottenfeld Group, where three traders worked before they were arrested in connection with the Galleon case, Judge Jed wants more info about how the regulators came up with the $460,475.28 they say Schottenfeld needs to pay in disgorgement fees. (We’ll now get to see the math skills of some SEC employees when they’re not looking at porn.) He's given them until next week to come up with the answers.

Judge Jed also wants details on how and when the trading firm plans to implement new compliance recommendations and hire an outside consultant to watch over them. He pulled a similar maneuver last year when he refused to approve a settlement between the SEC and Bank of America over the shotgun wedding to Merrill Lynch.

He reluctantly approved the settlement after the SEC nearly tripled the penalties.

Read Judge Rakoff’s Order to the SEC

Attorneys for Raj Rajaratnam have filed a brief to the Second Circuit Court of Appeals seeking to reverse an order compelling them to turn over wiretap evidence to the Securities and Exchange Commission.

Rakoff.Uber

And Jed Rakoff has seen some sh!t.

Roomy Khan, one of the key cooperating witnesses in the Galleon insider trading case, used her extensive rolodex of insiders to gain access to secret market-moving information. Recently released court documents show that list of contacts could be longer than we thought.

After ratting on his pals for insider trading, former Goldman analyst David Pajcin decided to hightail it out of town. (Most likely to his native Croatia, although we doubt he’s holed up with his underwear seamstress aunt.) But if authorities can find him, and you know the crack investigators at the SEC will, Pajcin will owe the government $28 million, according to a judgement handed down by U.S. District Judge Kimba Wood late yesterday.

I've had some fun these last few days proposing counterintuitive theories for why Citi might not suck as much as you probably think it does and it's nice to see others joining in the pastime, even if this sounds a little far-fetched: The district court’s logic appears to overlook the possibilities (i) that Citigroup might well not consent to settle on a basis that requires it to admit liability, (ii) that the S.E.C. might fail to win a judgment at trial, and (iii) that Citigroup perhaps did not mislead investors. That piece of rank conjecture is from the Second Circuit's opinion on an appeal* of Judge Rakoff's rejection of the settlement between the SEC and Citi over some mortgage-backed securities. Here's DealBook: