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Guardian.co.uk – My coverage of Raj Rajaratnam, the Wall Street hedge fund manager accused of orchestrating a sophisticated insider trading ring with tipsters at firms such as IBM and Intel, has prompted an email from an acquaintance of the accused who says the Sri Lankan-born billionaire is not the “ogre” he is being made out to be.
Vijay Dandapani, chief executive of a budget hospitality company in Manhattan called Apple Core Hotels, writes to say that he was invited by Rajaratnam on a cricket trip a few years back and has since seen him “off and on” in New York.
“I do know Raj, though not well, and find it hard to believe that he is the ogre he is being made out to be,” says Dandapani.
Bloomberg – First came the biggest bear market since the 1930s, then Bernard Madoff’s $65 billion Ponzi scheme and the threat of increased regulation. Now hedge funds have a new concern: getting caught on tape as the government expands its use of wiretaps to ferret out insider trading.
Prosecutors, using secretly recorded phone conversations for the first time against hedge funds, alleged Oct. 16 that billionaire Raj Rajaratnam and five others made $20 million by swapping material inside information on companies such as Hilton Hotels Corp. and Google Inc. They may charge at least 10 more people soon, people familiar with the matter said last week.
WSJ – A group of victims of terror attacks by Sri Lanka’s Tamil Tigers rebels filed suit against Raj Rajaratnam, the Galleon Group hedge-fund founder charged in an insider-trading case, accusing him of funding the Tigers’”crimes against humanity.”
The suit was filed Thursday in U.S. District Court in New Jersey by 30 people who say they are survivors of attacks carried out by the Liberation Tigers of Tamil Eelam during decades of civil war against the Sri Lankan government.
The lawsuit alleges that from 2000 to 2007, Mr. Rajaratnam and a family foundation led by Mr. Rajaratnam’s father gave more than $5 million to a U.S. charity, called the Tamil Rehabilitation Organization, that the U.S. government subsequently declared in 2007 to be a fund-raising front for the Tamil Tigers.
AP – The arrest of a billionaire in an insider trading case last week drew new attention to hedge funds — investment firms that, for many, evoke an exclusive world where the super rich use exotic investing techniques to grow yet richer.
The understanding usually stops there.
In the case against Raj Rajaratnam, federal prosecutors accused the portfolio manager for the Galleon Group of using a powerful Rolodex of contacts to acquire insider information to trade securities. Five other hedge fund managers and corporate executives were charged in the case, and prosecutors suggested the problem could be more widespread.
On Thursday, a lawsuit was filed claiming that Rajaratnam also used his money to help finance Sri Lankan rebels.
Bloomberg – New Castle Funds LLC’s efforts to survive the arrest of its co-founder in the Raj Rajaratnam insider-trading case were set back as a Swiss bank ended a partnership and Rajaratnam decided to liquidate his funds.
Union Bancaire Privée liquidated a fund that it hired New Castle to manage, the Geneva-based bank said yesterday in an e- mailed statement. The Luxembourg-registered Market Neutral U.S. Equity fund had assets of $36.1 million at Aug. 4, according to Bloomberg data.
New York Times – Roomy Khan, the central witness who brought down the Galleon hedge fund, is a former Galleon employee with a history of financial trouble who agreed to cooperate with prosecutors after she was caught making trades using inside information.
Ms. Khan, previously identified only as “Tipper A” or a cooperating witness, provided much of the evidence that prosecutors are using to bring insider trading charges against the billionaire Raj Rajaratnam, who is shutting down his Galleon fund in the wake of the charges.
New York (HedgeCo.net) The Galleon scandal is raging full force, with Raj Rajaratnam’s global hedge funds under a microscope. Supervising the case is U.S. District Court Judge Jed S. Rakoff, who’s ruling on the Merrill Lynch/BofA case, earned him the nickname ‘Judge Dread’ on Wall Street, according to The Post.
Reuters reported the Sri Lankan stock market .CSE tumbling more than 4%, as investors withdrew money. Galleon Asia is keeping its $500 million AUM Asia hedge fund liquid, as they also await a possible mass exodus.
The CEO of the Asia hedge fund, David Lau, said the Asia fund is not under investigation by the SEC at the time. He said the fund has reduced leverage in the past few days but there has been no request for redemptions as yet, according to CNBC. The Asia fund, which runs a long/short equity and macro strategy, has risen over 15% since the start of the year.
In the USA’s largest hedge fund insider-trading scheme, Raj Rajaratnam was taken into custody in New York on Oct. 16, 2009.
Reuters – New Castle Partners LLC, a hedge fund swept up in the biggest insider-trading scandal in years, said co-founder Mark Kurland has taken a leave of absence and that Danielle Chiesi, a consultant, is no longer associated with the firm.
Kurland and Chiesi were among six people, including Galleon Group founder Raj Rajaratnam, charged on Friday by the U.S. Justice Department and the U.S. Securities and Exchange Commission, accused of reaping more than $20 million by trading on inside information in a dozen companies.
Boston.com – Federal investigators plan to charge at least 10 securities professionals with insider trading, some linked to the criminal case against billionaire hedge fund manager Raj Rajaratnam that shook Wall Street last week, people familiar with the matter said yesterday.
The pending crackdown, more than two years in the making and among the biggest undercover operations into insider trading, may yield charges against hedge fund managers and their associates as early as this week, the people said, declining to be identified because the cases aren’t public. Authorities had planned to arrest Rajaratnam this week as part of a broader sweep, expediting it after learning he had bought a plane ticket to travel to London on Friday, one person said.
New York Times – Several hedge fund managers currently in legal hot water apparently have more in common that their judicial woes: they were all former Bear Stearns alumni.
William D. Cohan reports in Fortune that that Mark Kurland and Danielle Chiesi, who have been charged in the government’s insider trading case against Galleon Group chief Raj Rajaratnam, both previously worked at Bear Stearns Asset Management.
That puts them in the same camp with Ralph Cioffi and Matthew Tannin, who are currently on trial for fraud related to the collapse of the Bear Stearns hedge funds they managed.
New York (HedgeCo.net) – The SEC’s case against Raj Rajaratnam and his hedge fund Galleon Management LP, is sending ripples throughout the industry, as the use of wiretapping and its effects are emerging.
According to Bloomberg, an unidentified informant began setting up interviews and taping the conversations, leading to the uncovering of the alleged massive insider trading scheme that generated more than $25 million in illicit gains.
The SEC also charged six other hedge fund managers with insider trading, including senior executives at major companies IBM, Intel and McKinsey & Company.
“This complaint describes a web of fraud that has been unraveled,” said SEC Chairman Mary L. Schapiro.
“What we have uncovered in the trading activities of Raj Rajaratnam is that the secret of his success is not genius trading strategies. He is not the astute study of company fundamentals or marketplace trends that he is widely thought to be.” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “He cultivated a network of high-ranking corporate executives and insiders, and then tapped into this ring to obtain confidential details about quarterly earnings and takeover activity.”
New York (HedgeCo.net) – The jury selection has begun for the trial of two former Bear Stearns hedge fund managers, Matthew Tannin and Ralph Cioffi, over the alleged hedge fund securities and wire fraud.
Although the prosecution alleges that the hedge fund managers misled investors, they are not being charged with having contributed to the collapse of Bear Stearns. They could face up to 20 years in prison if convicted. Cioffi is charged with an additional count of insider trading for withdrawing $2m from one of the hedge funds.
Tannin’s personal Email, which he used as a diary, is being used to prove that he was worried about a possible “blow up” and was under some stress. The evidence also alleges that he had trouble sleeping and was taking some anti-anxiety medication.
The trial is expected to last six weeks. Tannin and Cioffi have denied the charges.
