The goofy Galleon gang: Wacky hedgies play cops and robbers...with real cash!

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As the full extent of the Galleon Group's insider trading comes to light, its story is starting to resemble something out of the movies. Although Raj Rajaratnam's house has already been compared to both The Sopranos and Goodfellas, the sad truth is that the real-life criminal ring lacks both the class of Tony Soprano's gang and the gravitas of Joe Pesci's. As details emerge, the whole mess seems to fall closer to the cartoonish excess of Animal House.

The central member of the gang -- the Otter, if you will -- may well be Zvi "The Octopussy" Goffer. Robert Khuzami, director of the Securites and Exchange Commission's Division of Enforcement, noted Thursday that Goffer got his James Bond–originated nickname "because of his reputation for having arms in so many sources of inside information." Goffer used his web of spies to cut trades both at Galleon and at his previous employer, the Schottenfeld Group.
Octopussy's spycraft went far beyond information-gathering. Goffer used security measures associated with spies and drug dealers, such as a cell phone he gave an insider, with two programmable numbers ("you" and "me"). When the inside trade was completed, Goffer removed the SIMM card, bit it, and broke the phone in half.

Ultimately, these precautions were useless; the FBI complaint filed on Thursday alluded to cell-phone conversations Goffer had had with various spies.

Whether the nicknames of Goffer's colleagues ("the Greek," "the Rat," "Artie") were borne of a quest for security or frat-boy bonhomie, the traders' playacting was certainly extensive. It's unclear which nickname belonged to which Galleon member, but Artie may have been Arthur Cutillo, an intellectual-property lawyer with M&A law firm Ropes and Gray who allegedly passed inside information to Goffer about such companies as 3Com, which Goffer then traded illegally.

For good measure, the Galleon gang used their tough-guy talk to talk about targets and trades, discussing "the Hilton Hit," going after "the Apple" -- and even worrying openly about going to "the Big House." Of course, these would-be gangsters were a bunch of tender-palmed Wall Street players. A conversation between Goffer and Galleon lawyer Jason Goldfarb noted that "the boys" were "hungry" because one had spent "a chunk of change" on his honeymoon, and another had "bought a new kitchen." "Now they're ready to replenish," Goldfarb said, "and that's what we're going to do."

And replenish they did. The 24-page complaint against Galleon contains accounts of a bundle of money "approximately the size of a VHS tape" passing from Galleon employee Craig Drimal to Goffer, and "a white bag" of money going from Goffer to Goldfarb. Goldfarb, presumably, passed the cash on to "the boys."

It's amusing to imagine self-styled bad boys playing Mafia thugs, but there's nothing funny about what they've allegedly stolen. Prosecutors say the Galleon gang netted approximately $51 million from just those conspiracies under investigation -- which, given the duration and extent of the gang's dealings, may be just the tip of the iceberg. For all of Goffer's playacting, the funding cuts of the last few years meant that the actual cops -- the SEC -- were barely in the game.

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