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Gupta not liable to Goldman for Rajaratnam tips

2nd Circuit says Gupta shouldn’t be forced to repay bank for Rajaratnam’s insider-trading profits

Even though he’s currently serving a two-year prison sentence for providing tips to notorious inside trader Raj Rajaratnam, Rajat Gupta recently got some good news.

On Friday, the 2nd Circuit rejected a Goldman Sachs Group Inc. shareholder’s suit arguing that Gupta, a former Goldman director, should be forced to repay Goldman for the profits that his tips helped Rajaratnam gain. Shareholder James Mercer argued that Gupta qualified as a “beneficial owner” of Goldman shares because he provided tips allowing Rajaratnam, a hedge fund manager at Galleon Group, to realize profits. He claimed Gupta could be held personally responsible to Goldman for Rajaratnam’s insider-trading crimes because Rajaratnam paid him for his tips, he had a $16 million stake in a Galleon fund and he had an opportunity to profit in Galleon because of his closeness to Rajaratnam.

Ashley Post

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