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U.S. authorities have filed criminal charges against 14 people allegedly involved in a widening insider trading scandal that has already snared one of the richest men in America.
Federal authorities filed fraud and conspiracy charges against lawyers and investment fund managers and others accused of illegally profiting from the use of inside information.
U.S. Attorney Preet Bharara said it was a wakeup call for Wall Street. At Thursday's news conference Bharara said the alarm bells were getting louder.
"The ethical and legal judgments of these defendants were flatly wrong," he said. "They weren't close calls, they weren't nuanced, this is not a grey area. These men and women have obligations to their employers, their clients and our markets. And they disregarded those obligations in favor of personal greed."
The U.S. Attorney said communication and training amongst the defendants was carried out using throw-away phones and techniques employed by drug dealers. He described how one of those arrested, Zvi Goffer, accused of operating of an insider training network, disposed of his phone.
"After the insider trading was complete, Goffer destroyed the disposable cell phone by removing the SIM card, biting it, and breaking the phone in two," he said. "He threw away half the phone and gave the other half to his tippee to throw away."
The U.S. Attorney had a warning for insider traders.
"There are certain moral truths that are self-evident," said Bharara. "And there should be a moment, hopefully before you are holding a bag of cash, delivered to you by somebody named Octopussy, that causes anyone in a position to tip or trade inside information to think twice before taking such a misguided step."
Today's action was a joint effort of the U.S. Attorney's office, the FBI and the Securities and Exchange Commission. Last month, authorities filed related charges against several others including one of the richest men in the United States, Raj Rajaratnam, the operator of an large investment company.