To no one's surprise, traders at the Galleon Group have been working on their resumes and calling their lawyers, after the hedge fund's founder Raj Rajaratnam was arrested on insider trading charges last week. However, he was in the office yesterday (out on $100 million bail) and also offered a letter to employees, friends and clients: "As I am sure you understand, I am not able to respond in detail to the charges recently brought against me. But let me be clear: they are, without exception, entirely baseless. I am innocent and will vigorously defend myself and our firm."
Also not surprising is the fact that many Galleon investors want out of the fund. Already, those holding about $1.3 billion of the $3.7 billion fund have requested to withdraw their funds and rival hedge funds are eager to take them on as clients.
Rajaratnam and five others, including some well-placed individuals such as a top executive at IBM, are accused of sharing information for profitable stock picks. The NY Times reports, "Insider trading, however, can be difficult to prove...The line between buying legitimate research, trading rumors and gossip, and illegally paying for market-moving information can be complicated." The feds, though, do have tapes of the defendants allegedly discussing deals—for instance, Rajaratnam said, "I get s--t on lots of companie."