Raj Rajaratnam, the British educated billionaire hedge fund manager arrested for alleged insider trading last week, has told his investors and employees that he is 'entirely innocent', according to a report on Bloomberg.
Mr Rajaratnam, who founded the hedge fund Galleon, which managed $7bn at its peak in 2008, was arrested with five alleged consiprators on October 16 in the largest ever hedge fund insider trading case
Prosecutors, who have built their case on recorded conversations with a web of alleged conspirators, allege that Mr Rajaratnam and Galleon reaped up to $25m by investing on tips from another hedge fund and a credit-rating firm.
"Raj Rajaratnam is not a master of the universe, but rather a master of the Rolodex," Robert Khuazmi, director of enforcement at the Securities and Exchange Commission, told a press conference on Friday.
The other alleged conspirators includes a managing director at Intel Corporation, a directors at McKinsey and a senior executive at IBM. The SEC complaint alleges Mr Rajaratnam and Galleon received tips on 10 companies, including Google and Intel.
Sri Lankan-born Mr Rajaratnam, 52, obtained a degree from the University of Sussex in England in 1980, according to the SEC, before going on to do an MBA in the United States.
He is worth $1.3bn, according to Forbes magazine, making him one of the world's 600 richest people.
Galleon, whose offices are in the IBM building on Madison Avenue, has already had investors seeking to withdraw $1.3bn of their money, according to the Wall Street Journal. Galleon also has offices in London, Singapore, Mumbai and California.
Mr Rajaratnam, who was released on a $100m bail, said in a "I am entirely innocent and will vigorously defend myself and our firm," Bloomberg reported, citing a letter written to employees and investors.
"As I move forward on my defence, I want to assure you that our commitment to our investors and employees will remain unwavering."
Investors in Galleon’s $350m technology fund, which is run by Mr Rajaratnam, can take their money out of the fund on a monthly basis.
Those in the firm’s other funds, including its largest, the $1.2bn Diversified fund, can take their money out every quarter with 45 days notice.
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The rise and fall of Rajaratnam
Rediff Business DeskRaj Rajaratnam, founder of Galleon Group, a New York-based hedge fund, arrested for insider trading describes himself as a 'focused' man.
His favourite quote: "Only the paranoid survive." How he will survive now is however a million-dollar question.
He is among the six arrested in connection with the largest hedge fund insider-trading ever, which includes two Indian Americans and a Sri Lanka-born billionaire.
Besides the Tamil-origin Raj Rajaratnam, the two Indian Americans Rajiv Goel, director, strategic investments at Intel and Anil Kumar, a director at McKinsey were arrested in the $20 million hedge fund insider-trading case.
Jim Walden, Rajaratnam's attorney, said his client is innocent and will fight against the insider-trading charges. Rajaratnam has been released on a bail of $100 million. He has to limit his travel to a 110 mile radius of New York city and has surrendered his passports to the court.
If convicted all of them face imprisonment of up to 20 years, according to the indictment, which reads that the defendants "routinely received inside information directly or indirectly from insiders and provided it to each other for the purpose of trading based on the information.
Minting millions
Raj and his accomplices are alleged to have made millions by using inside information from people at companies like Intel, Moody's and McKinsey.
The FBI for the first time used court-authorised wire taps to make these arrests. The agency has transcripts of phone conversations between Rajaratnam and executives of Bear Stearns, IBM, Intel and McKinsey. Prosecutors also used recorded conversations with an unnamed individual who became a witness for the government.
Prosecutors said Rajaratnam used insider information to trade ahead of results announcements and big ticket deals of the companies. The trade included companies like Google, IBM, Sun Microsystems and Hilton group of hotels.
Danielle Chiesi from New York, Robert Moffat from Connecticut and Mark Kurland from New York were also arrested. Rajaratnam, Kurland, Chiesi, and others traded on material, non-public information given as tips by insiders and others at hedge funds, public companies, and investor relations firms -- including Intel, IBM, McKinsey, Moody's Investors Services Inc., Market Street Partners, Akamai Technologies, Inc. and Polycom Inc.
Rajaratnam, Chiesi, Kurland and others earned millions of dollars of illegal profits for themselves and the hedge funds with which they were affiliated.
One of the insiders, Kumar, profited from investments in Galleon. Goel, also an insider, received profitable trades in a personal account managed by Rajaratnam, the complaints said.
A billionaire hedge manager
Rajaratnam is estimated to have received $200m in 2007 from Galleon, making him one of the best-paid hedge fund managers in the world.
A self-made billionaire hedge fund manager, Rajaratnam is the 236th richest American according to Forbes magazine with an estimated net worth of $1.8 billion. He is the world's 559th richest man.
He is also the richest Sri Lankan in the world. As of 2009, his Diversified Fund has returned 22.3 per cent, outperforming the Nasdaq by 33 per cent.
Rajaratnam has been featured among the elite US money managers in a book called The New Investment Superstars: 13 Great Investors and their Strategies for Superior Returns by Lois Peltz.
His hedge fund is currently valued at $3.7 billion, down from its peak of $7 billion in 2008.
Raj Rajaratnam received a bachelor's degree in engineering from the University of Pennsylvania and MBA from the Wharton School.
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