Raj Rajaratnam, a portfolio manager for Galleon Group, a hedge fund with up to $7 billion in assets under management, was accused of conspiring with others to use insider information to trade securities in several publicly traded companies, including Google Inc.

U.S. Magistrate Judge Douglas F. Eaton set bail at $100 million to be secured by $20 million in collateral despite a request by prosecutors to deny bail. He also ordered Rajaratnam, who has both U.S. and Sri Lankan citizenship, to stay within 110 miles of New York City.

U.S. Attorney Preet Bharara told a news conference it was the largest hedge fund case ever prosecuted and marked the first use of court-authorized wiretaps to capture conversations by suspects in an insider trading case.

http://finance.yahoo.com/news/Billionaire-among-6-nabbed-in-apf-2808194948.html?x=0

 

Also charged in the scheme are............

 Rajiv Goel, 51, of Los Altos, Calif., a director of strategic investments at Intel Capital, the investment arm of Intel Corp.,

Anil Kumar, 51, of Santa Clara, Calif., a director at McKinsey & Co. Inc., a global management consulting firm, 

Robert Moffat, 53, of Ridgefield, Conn., senior vice president and group executive at International Business Machines Corp.'s Systems and Technology Group.

The others charged in the case were identified as..

Danielle Chiesi, 43, of New York City,

Mark Kurland, 60, also of New York City.

Galleon Inundated With Redemptions, Survival In Doubt

October 20, 2009

Raj RajaratnamThe vultures are circling Galleon Group, with many saying the New York-based hedge fund has no chance of surviving after its founder was charged with insider-trading. Investors representing more than one-third of Galleons $3.7 billion in assets have filed redemption requests.

The withdrawal requests began coming in via fax and telephone on Friday morning, after news of founder Raj Rajaratnams arrest become public, according to The Wall Street Journal. Rajaratnams own technology hedge fund allows monthly redemptions; the firms other funds only quarterly. All require 45 days notice.

Rajaratnam himself reportedly spoke to some investors who called the firm.

Galleon reportedly moved quickly to liquidate some of its holdings to meet the impending redemptions. Rick Schutte, the firms chief operating officer, told Galleon portfolio managers to sell off some of their positions in a coordinated, orderly fashion, the Journal reports, citing a trader at the firm. But the firm isnt dumping everything; the trader said he was merely told to begin raising cash.

The firm has had no trouble trading, although two of its prime brokers, Bank of America Merrill Lynch and Barclays, have told the hedge fund they wont trade for it anymore, according to the Journal. Galleon reportedly has a relationship with about 10 other brokerages.

This may shutter Galleon, Ron Geffner of law firm Sadis & Goldberg told Reuters. But there is not yet enough information to determine that.

In particular, institutional investors are likely to flee a fund tarred with such serious accusations. At least one, advisory Rochdale Investment Management, has already announced that it is redeeming its $2 million investment.

I dont think any big investor would hang around and wait for the verdict when they see headlines in the newspaper every day, a hedge fund investor told Reuters. Rajaratnam has not yet entered a plea on the conspiracy and securities fraud charges, but has proclaimed his innocence. He is currently free on $100 million bail.

http://www.finalternatives.com/node/9431

Galleon To Close Hedge Funds, Seek Buyer

October 21, 2009

Raj RajaratnamWith its founder facing insider-trading charges, the Galleon Group will liquidate its hedge funds and may seek a buyer.

Raj Rajaratnam, who faces 11 charges of conspiracy and securities fraud in a $20 million insider-trading scandal, told investors that the New York-based hedge fund was exploring alternatives and hoped to keep its trading team together. According to reports, Galleon has been approached from interested parties, although no names have surfaced.

In the meantime, the $3.7 billion firm will begin the process of liquidating its funds. The firm was inundated with redemption requests in the days after Rajaratnams arrest on Friday. Galleon did not say when the liquidation will be completed, but Bloomberg News reports it will follow the firms standard redemption policies. Investors will not receive their money before next year.

I have decided that it is now in the best interest of our investors and employees to conduct an orderly wind-down of Galleons funds while we explore various alternatives four our business, Rajaratnam wrote to investors and employees. At this important time, I want to reassure investors of the liquidity of our funds and assure Galleon employees that we are seeking the best way to keep together what I believe is the best long/short equity team in the business.

Rajaratnam, who is free on $100 million bail, also took the opportunity to assure investors that he is innocent of all the charges.

http://www.finalternatives.com/node/9443

Rajaratnam Informer Identified As Ex-Galleon Employee

October 22, 2009

Raj RajaratnamThe woman at the center of the case against Galleon Group founder Raj Rajaratnam has been identified as a hedge fund manager and former Galleon employee.

Roomy Khan is the person identified as the cooperating witness in the criminal complaint filed against Rajaratnam and five other alleged members of the insider-trading scheme. According to the complaint, the cooperating witness or CW, who has agreed to plead guilty to conspiracy and securities fraud charges, was the source of information for several of the alleged insider-trades at the heart of the governments case against Rajaratnam.

According to The Wall Street Journal, which first identified Khan as the witness in question, Kahn worked briefly for Galleon in the late 1990s. But she ran into financial difficulties earlier this decadelast year her former maid sued Khan and her husband, alleging they owed her moneyand reapplied at Galleon. She didnt get the job, but during her interview, Rajaratnam asked if she has access to any inside information about any public companies.

The complaint says she offered tips about Polycom Inc. in the hopes of securing a position with Galleon, and in anticipation of receiving future insider tips from Mr. Rajaratnam in exchange. She later alleged arranged to pay a Moodys Investor Service analyst $10,000 for a tip about the takeover of Hilton Hotels, and was also the alleged source of insider-information about Google Inc.  Khans tips allegedly earned Galleon $13 million, the bulk of its supposed profits from the scam, and Khan herself $1.5 million.

Deep Shah, previously identified as the Moodys analyst who passed on the Hilton tip, yesterday denied the allegation.

I dont know anything about this, Shah told the Journal.

Khan, or whoever CW is, began cooperating with the government in November 2007. In addition to providing the government with information about the tips she had passed on, she taped conversations with Rajaratnam.

http://www.finalternatives.com/node/9456