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September 22, 2011

"NYC stock trader 'Octopussy' gets decade in prison"

The title of this post is the headline of this BusinessWeek report on the latest sentencing news from a high-profile insider trading case.   Here are the interesting details:

A stock trader dubbed the Octopussy because he reached for so much inside information was sentenced Wednesday to 10 years in prison by a judge who said a harsh punishment was necessary because insider trading is so difficult to detect.

Zvi Goffer was convicted with two others in June in a conspiracy to pay bribes to coax confidential information out of two shady lawyers at a Manhattan firm. "Insider trading is very, very hard to detect," U.S. District Judge Richard Sullivan said as he also ordered Goffer to pay more than $10 million in restitution. "Because of that, it has to be dealt with harshly."  He added: "These crimes are not going to be tolerated, certainly not in my courtroom."

The 34-year-old Goffer told the judge in a pre-sentencing letter that he now realizes he had warped perceptions of "survival of the fittest."  He said "everyone is doing it" is not a good excuse for doing wrong.  Goffer was among more than two dozen people convicted in what prosecutors called the biggest hedge fund insider trading case in history.

Given a chance to speak, Goffer apologized first to investors in the stocks in which he had an unfair advantage, saying:  "They didn't have the information I had." He began crying when he apologized to his brother, Emanuel, who was convicted at trial along with him and is awaiting sentencing.  A third defendant, Michael Kimelman, also awaits sentencing....

The sentence, one of the longest ever given to someone convicted of insider trading, caused Goffer's wife to break down in sobs. "What am I going to do?" she called out in court at one point. "It's not fair!" A woman beside her then shouted a profanity, causing Sullivan to rise from the bench and threaten to bring in U.S. marshals to make arrests. "This is a courtroom, not a street corner," he said.

Goffer was convicted by a jury that viewed evidence that he had arranged to pay two attorneys nearly $100,000 in 2007 and 2008 for inside tips on mergers and acquisitions. During the two-week trial, prosecutors introduced evidence that Goffer gave conspirators prepaid cellular telephones in an effort to reduce detection by law enforcement.

The judge said the message of the prosecution to Wall Street has to be more than a warning that prepaid telephones are not the best way to dodge prosecution.  He said Goffer had repeatedly demonstrated that he knew he was breaking the law and didn't care. "It's a game that you and others seem to find exciting," he said.

Before starting his own firm, Goffer worked for nine months for Raj Rajaratnam, a one-time billionaire who was convicted earlier this year of charges at his own insider trading trial...   Rajaratnam and Goffer were among more than two dozen people convicted in a case that utilized an unprecedented number of wiretaps for a white-collar case. U.S. Attorney Preet Bharara has said the government was responding to the increased use of techniques more commonly used by drug dealers and mobsters to cover up their crimes.

This Bloomberg piece, headlined "Galleon Insider Trading Case Scorecard: Average Prison Term Is Three Years," provides an effective review of all the sentences so far imposed in this matter. The piece starts this way:

Galleon Group LLC co-founder Raj Rajaratnam will be sentenced on Oct. 13 for insider trading after being convicted by a jury in Manhattan federal court.

Prosecutors say Rajaratnam, who was convicted in May, should serve as long as 24 1/2 years in prison, calling him the “modern face of insider trading.”  Yesterday, judges in Manhattan sentenced two other convicted insider traders -- Zvi Goffer and Winifred Jiau -- to prison terms of 10 years and four years, respectively.

Since Rajaratnam’s arrest in October 2009, judges in Manhattan federal court have sentenced 12 defendants in cases linked to Galleon.  All but two pleaded guilty. The average prison term has been 35.75 months, or almost three years behind bars.

September 22, 2011 at 08:39 AM | Permalink


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i've seen people get less for murder. the guy has two little kids. he could have made restitution and given back to society with a shorter jail term. the judge is a pompous ass.

Posted by: chris kualho | Sep 23, 2011 10:19:19 AM

When examining futures stock market trading curbs, it`s a well-known saying that traders should have a healthy fear of the market. It seems like a perfectly reasonable assumption to make. The market is volatile, and each trade you make is to some extent unpredictable. But, it`s one thing to learn to accept the risk of the market, and another entirely to be afraid of it.

Posted by: Explosive stock option | Oct 3, 2011 1:46:17 AM

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