Cramer: Rajaratnam Case Helped Diminish Insider Trading

Hedge fund founder Raj Rajaratnam was found guilty on all 14 counts in a sweeping insider trading verdict Wednesday. The broadest Wall Street insider trading probe in decades, Cramer said it may have helped put an end to most insider trading.

The U.S. government used phone taps to prosecute Rajaratnam, among others. The government's aggressive use of the secret recordings is a tactic historically deployed in organized crime and drug trafficking cases. When investors learned the recordings were being used in white-collar probes, too, Cramer said most inside trading stopped. After all, he said investors don't want to go to jail.

Cramer said most mystifying aspect of the Rajaratnam case was that that Galleon Group founder got calls with inside information that were "as good as gold." Yet Cramer said Rajaratnam isn't a fundamental investor. So the 53-year-old money manager had to ask whether the information would actually impact the stock, he said.

Rajaratnam faces a minimum of 15-1/2 years in prison after the verdict in Manhattan federal court convicting him on all 14 counts of conspiracy and securities fraud. The jury's decision affirmed the prosecution case that Rajaratnam ran a web of highly-placed insiders from McKinsey & Co to Intel to a former Goldman Sachs board member to leak valuable corporate secrets to him.

After the jury was dismissed, Rajaratnam was released until his July 29 sentencing. He is free under a $100 million bail package that will now include an electronic monitoring device and house arrest in his Manhattan apartment.

Reuters contributed to this report

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