Galleon Group will pull the plug on its $3.7B hedge fund biz

A hedge fund company whose manager is criminally charged in an insider trading case told clients Wednesday it's shutting down its funds.
DEC 21, 2009
By  Bloomberg
A hedge fund company whose manager is criminally charged in an insider trading case told clients Wednesday it's shutting down its funds. A letter obtained by The Associated Press said Galleon Group LLP plans "an orderly wind down" of its funds while it explores "various alternatives for its business." Portfolio manager Raj Rajaratnam wrote to clients and employees that he wants to reassure them the funds are liquid, meaning assets such as stock holdings can be converted to cash for distribution to fund shareholders. New York-based Galleon Group manages about $3.7 billion. Prosecutors who filed the case against Rajaratnam and five others on Friday said Galleon had previously managed up to $7 billion. Publicity surrounding the case led some investors to pull out money. Galleon Group's letter did not specify what business options the company was exploring. A person familiar with the situation said Galleon had been approached by parties interested in a possible purchase of the company. The person requested anonymity because of the sensitive nature of the situation. The person said distributions to shareholders were expected to follow normal procedures for the funds, with cash to be returned starting Jan. 1. Hedge funds typically restrict how quickly investors can get cash back, with waiting periods that can stretch several weeks. Rajaratnam is accused of conspiring to use insider information to trade securities in several publicly traded companies, including Google Inc. In Wednesday's letter, he said he's "innocent of all charges." Rajaratnam, 52, was ranked No. 559 by Forbes magazine this year among the world's wealthiest billionaires, with a $1.3 billion net worth. Rajaratnam has been described as a savvy manager of billions of dollars in technology and health care hedge funds at Galleon, which he started in 1996. Prosecutors who announced the case Friday said it was the largest ever brought against a hedge fund. The Securities and Exchange Commission, which brought separate civil charges, said the scheme generated more than $25 million in illegal profits. Galleon Group said it had no knowledge of the investigation before it was made public. The company said it intended to cooperate with authorities. Prosecutors say Rajaratnam obtained insider information and then caused the Galleon Technology Funds to execute trades that earned a profit of more than $12.7 million between January 2006 and July 2007. Other schemes garnered millions more and continued into this year, authorities said. Also charged are Rajiv Goel, 51, of Los Altos, California, a director of strategic investments at Intel Capital, the investment arm of Intel Corp.; Anil Kumar, 51, of Santa Clara, California, a director at McKinsey & Co. Inc., a global management consulting firm; and Robert Moffat, 53, of Ridgefield, Connecticut, 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, and Mark Kurland, 60, both of New York City.

Latest News

The 2025 InvestmentNews Awards Excellence Awardees revealed
The 2025 InvestmentNews Awards Excellence Awardees revealed

From outstanding individuals to innovative organizations, find out who made the final shortlist for top honors at the IN awards, now in its second year.

Top RIA Cresset warns of 'inevitable' recession amid tariff uncertainty
Top RIA Cresset warns of 'inevitable' recession amid tariff uncertainty

Cresset's Susie Cranston is expecting an economic recession, but says her $65 billion RIA sees "great opportunity" to keep investing in a down market.

Edward Jones joins the crowd to sell more alternative investments
Edward Jones joins the crowd to sell more alternative investments

“There’s a big pull to alternative investments right now because of volatility of the stock market,” Kevin Gannon, CEO of Robert A. Stanger & Co., said.

Record RIA M&A activity marks strong start to 2025
Record RIA M&A activity marks strong start to 2025

Sellers shift focus: It's not about succession anymore.

IB+ Data Hub offers strategic edge for U.S. wealth advisors and RIAs advising business clients
IB+ Data Hub offers strategic edge for U.S. wealth advisors and RIAs advising business clients

Platform being adopted by independent-minded advisors who see insurance as a core pillar of their business.

SPONSORED Compliance in real time: Technology's expanding role in RIA oversight

RIAs face rising regulatory pressure in 2025. Forward-looking firms are responding with embedded technology, not more paperwork.

SPONSORED Advisory firms confront crossroads amid historic wealth transfer

As inheritances are set to reshape client portfolios and next-gen heirs demand digital-first experiences, firms are retooling their wealth tech stacks and succession models in real time.