Danielle Chiesi on trial for insider trading

Friday, October 25th, 2013 By

IBM

A former IBM executive was one of Danielle Chiesi's targets. Image from Flickr.

In the high-power, high-risk game of information trading, Danielle Chiesi has becomeĀ  “a confirmation of all (people have) suspected is wrong with Wall Street and the hedge fund industry,” according to Fortune. Former IBM executive Bob Moffat and Danielle Chiesi have both been arrested and charged with securities fraud and conspiracy.

The story of Danielle Chiesi

Danielle Chiesi was an employee of the Galleon hedge fund, employed directly by Raj Rajaratnam, the founder of the fund. Danielle Chiesi traded mostly and primarily in information. As an information gatherer for Galleon, Danielle Chiesi maintained a “stable” of sources at companies that she was targeting for inside information. By targeting older men, wearing short skirts and low-cut shirts, and telling them all that “I love the three S’s, sex, stocks and sports” she was able to get inside stock information for her employer, says Fortune. A former beauty queen and sorority girl, Chiesi was well-known as a powerful seductress.

The crimes of Danielle Chiesi

While targeting and sleeping with lots of high-profile executives is not technically illegal, what she did with some of the information was. By gathering and passing on inside information about tech stocks, Chiesi was allegedly participating in insider trading. She has pleaded not guilty to charges of insider trading, and the trial is currently under way.

The effects of insider trading

Insider trading can be a very difficult crime to both prove and understand. The idea of the stock market and stock trading is that everyone is “betting” on stocks with the same information. When people get inside information from people who work at the company, they are able to buy or sell stocks before the information is public knowledge. In other words, people like Danielle Chiesi cheat the system. This is the same crime that Martha Stewart was convicted of. The story of Danielle Chiesi is most compelling because it proves that even the most quiet of tech execs can, under the right circumstances, give up information they know they are not supposed to. Is a financial system that can be gamed this easily one that we should be putting our money into?

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This post has one comment

  1. randywest jr says:

    Some of the facts above are incorrect. Danielle Chiesi didn't work for Galleon, she worked at New Castle Funds. She traded on inside information to benefit herself, Mark Kurland (New Castle's CEO) and New Castle as a company. Rajartnam was Danielle's buddy. He ran Galleon Group and she passed info. to him where he and his firm profited. It return, he passed inside info to Danielle and New Castle. There are another 8 or so people in a separate yet in some ways linked insider scandal including people like David Plate, Zvi Goffer, Goffer's brother, Arthur Cutillo. Galleon is just the tip of the iceberg. Look here for a start on the other ring of illegal inside traders: http://www.businessweek.com/news/2010-07-16/plate…

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