His life experienced a twist in the year 2010, when Raj Rajaratnam, a hedge fund manager and founder of Galleon Group from Sri Lanka was accused of insider trading. Gupta was arrested by FBI towards the end of 2011 for disclosing the earnings of his company (Goldman Sachs) to Rajaratnam, and Galleon Group is said to have benefited a lot from the information provided. Gupta is said to have passed information about Warren Buffet's decision to invest $5 billion in Goldman Sachs to Rajaratnam. As a result, Rajaratnam was able to buy the stock and make a profit of $800,000, before the news was made public.

The fact that Gupta committed the crime when the company faced serious financial crisis added more seriousness to the offense. During Rajaratnam’s trial, his conversations with Gupta, were played on tape which gained wide spread attention and disrepute. Rajaratnam was heard talking about Rajat Gupta saying. "I think he wants to be in that circle. That's a billionaire circle, right? Goldman is like the hundreds of millions circle, right? And I think here he sees the opportunity to make $100 million over the next five years or 10 years without doing a lot of work.’’