Galleon sinks as Rajaratnam shuts up shop
GALLEON Group, the $3.7bn (£2.2bn) hedge fund firm, is liquidating its funds after its billionaire founder Raj Rajaratnam was charged last week with running one of the biggest insider-trading schemes in history.
Rajaratnam, who is on $100m bail after being arrested last week, said he is considering a sale of the firm to a rival and he is already thought to have been approached by interested parties.
Investors in the funds would not be expected to get their money back until January next year at the earliest. “I have decided that it is now in the best interest of our investors and employees to conduct an orderly wind down of Galleon’s funds while we explore various alternatives for our business,” said Rajaratnam.
Since Rajaratnam’s arrest, investors in the funds have tried to pull money out and by Monday redemption notices were thought to have already reached $1.3bn.
Investors ranging from college endowment funds to bankers began demanding their cash back immediately after the news of the arrest broke on Friday.
Galleon‘s roughly 130 staff are beginning to seek employment elsewhere, with many worried that their time at Galleon could hurt their chances with future employers.
Rajaratnam also said Galleon’s funds are liquid and its employees “are seeking the best way to keep together what I believe is the best long/short equity team in the business”.
Galleon traders were thought to be selling many of the stocks it holds this week in an effort to raise cash to meet redemption requests.
The Galleon collapse comes as the hedge fund industry is recovering from a tough period following the uncovering of a Ponzi scheme by convicted fraudster Bernard Madoff.