Galleon's founder to wind down $3.7bn hedge funds
Thursday 22 October 2009
Raj Rajaratnam, the hedge fund manager arrested on charges of insider dealing, has given up the fight to save his funds after investors demanded their money back.
Galleon, which the Sri Lanka-born billionaire founded in 1997, said yesterday that it was beginning an orderly wind-down of the funds, whose assets total about $3.7bn. They have already begun selling some of the most easily tradeable shares in their portfolio, but it could take time to find buyers for big positions in some small-cap stocks, clients were being warned yesterday.
"The privilege of managing investors' capital is a responsibility that I have always taken very seriously," Mr Rajaratnam wrote in a letter to investors yesterday. "I want to reiterate that I am innocent of all charges and will defend myself against these accusations with the same intensity and focus I have brought to managing our investors' capital." Galleon grew into one of the most active and powerful hedge funds on Wall Street because its traders aggressively sought information about companies that they could turn into a bet on their future share price moves. But the FBI and securities regulators say that Galleon went over the line, time and time again, by trading on inside tips illegally gleaned from a network of contacts at technology companies and consulting firms.
Mr Rajaratnam and five others were slapped with civil and criminal charges last Friday. His co-defendants include executives from the technology companies Intel and IBM, a consultant at McKinsey and another hedge fund manager.
In his letter, Mr Rajaratnam says Galleon is also exploring other options for the funds, which could include an outright sale to another investment group. Industry experts said the collapse of the company was inevitable once the FBI swooped.
"The redemptions coming in were likely so large, and no one wants to be the last out the door," Brad Balter, head of Boston-based Balter Capital Management, told the Bloomberg news agency. "As an investor, you don't want that in your portfolio, even if the charges haven't been proven."
SFO investigates bankrupt London trader Nick 'Beano' Levene
The Serious Fraud Office is investigating the activities of the financier Nicholas "Beano" Levene, the bankrupt City trader and former vice-chairman of the football club Leyton Orient.
Mr Levene, 45, is alleged to owe clients as much as £200m. The SFO said it had been liaising with the Metropolitan Police.
Mr Levene, of High Barnet, north London, is missing, and has not responded to a series of High Court writs demanding repayment of gambling debts and trading profits.
The derivatives expert worked for MG Equity Partners, based in Berkeley Square. Insolvency experts at Deloitte are trying to pinpoint debts and assets.
Among those making claims against him are the bookmaker IG Index and the transport tycoons Brian Souter and Ann Gloag.
A spokesman for Leyton Orient declined to comment on whether Mr Levene still owns a 6 per cent stake in the club. He said: "Nick Levene has tendered his resignation as vice-chairman of Leyton Orient FC to the club's board of directors. He is replaced by Eddie Hearn, who was appointed to the board in 2007."
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