After 12 days of deliberations, the jury in the Raj Rajaratnam insider trading case found him guilty on all 14 counts. Numerous media outlets have responded with the same question: what does this conviction mean? That question will be gradually sorted out over time but for now, at least, one consequence of the conviction is crystal clear: it is time for the people who bet that Rajaratnam would be convicted to get paid!

While Rajaratnam's conviction after nearly two weeks of jury deliberations may have come as a surprise to some people, it was no surprise at all to those who were willing to risk some cold cash on the outcome. In fact, the Intrade line on the outcome of the trial has, for almost two weeks, pegged the chance of Rajaratnam being convicted on at least one count at no less than 94% likely.

Intrade describes itself as a "prediction market" that allows people to make predictions on the outcome of real-world events such as whether a particular political candidate will win the next election or whether a certain actress will win an Academy Award. For each event there are only two possible outcomes - yes, it will happen or no, it will not happen. People who predict the event will happen buy shares, and those who think it will not happen sell shares. When the outcome becomes known, the market settles at either $10.00 if the event happened or $0.00 if it did not.

Until yesterday, shares of "Rajaratnam will be convicted on at least one count" sold for $9.40, but now they have jumped to $10.00. The "Raj-guilty trading chart" can be viewed here or in the image below:

Topics