On November 8, 2011, Judge Jed S. Rakoff of United States District Court for the Southern District of New York imposed a record civil penalty of $92,805,705 on Galleon Group founder Raj Rajaratnam. Judge Rakoff’s opinion analyzes the civil penalty provisions of the Securities and Exchange Act of 1934 in a civil insider trading action against a hedge fund manager that has been convicted of insider trading in a parallel criminal case. The opinion illustrates the factual and legal considerations that influence the calculation of civil penalties; the public policy purpose of civil penalties; whether civil penalties should be based on gross trading profits of a hedge fund or net fees and profits personally gained by the individual defendant; and the time during which relevant profit gained or loss avoided should be measured. For hedge fund managers, Rakoff’s ruling serves as a reminder that profits from insider trading, if discovered, are in effect a loan from the government with usurious terms. You have to pay it back, and the interest includes whatever you gained, the full value of your management company and the entirety of your reputation.