Insider Trading Victims Are Still Snuffleuphaguses

James Altucher, managing director of Formula Capital, describes one of the alleged insider trades made by Galleon:

Lets look back at an ancient case: the Galleon insider buying of Hilton the day before it was acquired by Blackstone. Galleon supposedly paid an analyst $10,000 to give up the information on this merger. Galleon made $4,000,000 on the trade.

On July 3, 2007, after the market closed, Blackstone announced they were buying Hilton. Raj had known and made a ton of money. Everyone knew at the time there was insider trading involved. I even went on CNBC that very weekend to discuss what had happened.

On July 2, the day before the deal was announced, Hilton shares were at $33.87. On July 3, Hilton shares made one of their biggest moves ever, closing almost 7% higher at $36.05 on double the normal volume before the deal was announced. And, by the way, it was a half day in the markets that day. Then Blackstone offered $47.50 a share for Hilton. It was clear even then that someone big had known something and had acted illegally on that information. In a column for the Financial Times I wrote “Certainly they’ll catch one or two criminals here” and they did. Its very hard to track down insider trading and I give the SEC kudos for doing a great job here. Did they catch all the culprits? Probably not, but they certainly made anyone thinking of doing this crime very very scared.

So my question is: who was harmed by the insider trading?

Certainly, it wasn't the people who sold shares on July 3. They got a better price than they would have if not for the insider trading.