MANHATTAN (CN) - Former Galleon executive Kris Chellam agreed to pay $1.75 million to settle claims that he passed inside trading tips to convicted hedge fund founder Raj Rajaratnam.
Chellam dished inside information about chipmaker Xilinx Inc. to his "close friend" Rajaratnam in late 2006, the Securities and Exchange Commission claimed Friday in a federal complaint. Chellam served as Xilinx's chief financial officer from 1998 to 2005.
When he tipped off Rajaratnam, Chellam had more than $1 million invested in Galleon and stood to profit from the Xilinx tips, the SEC said.
"In late 2006, Chellam tipped Rajaratnam to downward trends in Xilinx's business, which were at odds with the company's prior public projections," according to the SEC's civil lawsuit. "Based on Chellam's tips, Rajaratnam caused Galleon hedge funds to short Xilinx stock and garner illicit profits of approximately $978,684 after the negative information was announced to the public on December 7, 2006."
Months later, in May 2007, Chellam became the co-managing partner of a Galleon venture capital fund. He continued to pass inside information about Xilinx to his Galleon colleagues until his departure from the company in April 2009, according to the SEC.
Rajaratnam was sentenced last year to 11 years in federal prison, and ordered to pay $92.8 million in penalties, for orchestrating a large inside trading conspiracy from his now-defunct Galleon hedge fund.
Chellam has not been charged with a crime.
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