Compliancex

Just a few short years ago, only people in the Wall Street community could recognize the name Lloyd Blankfein. Now, the Goldman Sachs CEO is taking a star turn at the insider trading case of former Goldman Managing Director Rajat Gupta.

As has widely been reported, Mr. Gupta is on trial in connection with the “expert-network” probe of insider trading in the hedge fund sector. The focus of the probe is a series of tips passed on to Galleon Group fallen star Raj Rajaratnam. One tip concerned the release of Goldman’s financial statements in the run-up to the economic meltdown in 2008. The other was related to Warren Buffett’s capital infusion of $5 billion to prop the firm up as the Street was knee deep in things.

But the question remains “who dunnit?”

Both the New York Times DealBook and Business Today reported on the testimony yesterday that saw Mr. Blankfein return to the witness box. And with all this testimony and his multiple visits to Capitol Hill in the wake of the economic crisis, the Goldman big wheel is fast becoming a household name.

However, the devil is in the details as they say, and it is highly unlikely that Mr. Blankfein will reveal a smoking gun that takes Mr. Gupta down. Instead, prosecutors yesterday rolled out all sorts of “summary charts” of trading data, bar charts and phone records.

This evidence is designed to connect Mr. Gupta to Rajaratnam. While previous cases have relied on tapped phone conversations between Rajaratnam and his cronies, there are no damning tapes where Mr. Gupta’s voice can be heard. Moreover, in the tapes where Rajaratnam tells the other insider traders that info was provided to him by a Goldman MD, Gupta’s defense is that someone else did the dirty deed.

Thus far, the case against Mr. Gupta is largely circumstantial. This is so because he and Rajaratnam had a long standing relationship by way of a joint investment in a fund called Voyager Capital. But that play went bust and as it melted down, Mr. Rajaratnam pulled money out without Gupta’s knowledge.

That shenanigan led to a falling out between the two high rollers sometime around the time Goldman tips were being bandied about. But the exact date of the falling out remains unknown. From the looks of it, prosecutors are trying to show that the tips passed along to Rajaratnam were a “quid pro quo” in a play for Mr. Gupta to recoup his losses in the Voyager affair.

While the Manhattan DA has a solid track record and has brought down 58 of the 63 “experteers” thus far, the curious case against Mr. Gupta can go either way. He is of course innocent until proven guilty, and Team Gupta may be successful in creating a reasonable doubt defense. Meanwhile, Mr. Blankfein is getting more practice at smiling before the cameras and walking a fine line.

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Kyle Colona is a New York-based freelance writer and a Feature Writer for CompliancEX> and the Wall Street Job Report. He has an extensive background in legal and regulatory affairs in the financial services sector and his work has appeared in a variety of print and on-line publications. You can find him on linkedin.