Former colleagues of hedge fund titan Raj Rajaratnam secretly are bolstering the government's investigation of a large insider-trading ring, according to people familiar with the criminal probe.
Among those who are cooperating witnesses are California hedge-fund managers Ali Far and Choo Beng Lee, the people say. The U.S. attorney's office in Manhattan on Friday alleged that Mr. Rajaratnam along with two former Bear Stearns Cos. hedge-fund traders, several technology executives, a consultant and a ratings-firm analyst - illegally trafficked in nonpublic information of high-profile tech companies, generating a profit of $20 million.
 |
| Mr. Rajaratnam with his wife Asha. Pic courtesy Wall Street Journal |
A spokeswoman for the U.S. attorney's office of the Southern District of New York declined to comment. Messrs. Lee and Far didn't respond to requests for comment. Mr. Rajaratnam's lawyer, James Walden of Gibson, Dunn & Crutcher LLP said Mr.Rajaratnam "is innocent and he intends to vigorously defend this case in court."
The investigation has corporate America and Wall Street buzzing. The allegations, as part of one of the nation's largest-ever insider-trading cases, represent a significant blow to the $1.2 trillion hedge-fund industry, which has been lobbying to avoid heavy regulation in the wake of the financial crisis.
The paths of Messrs. Far, 48 years old, and Lee, 52 crossed with Mr. Rajaratnam in the early days of the technology-stock boom. Mr. Lee worked with Mr. Rajaratnam at brokerage firm Needham & Co. as a research analyst in the mid-1990s Mr. Rajaratnam launched hedge fund Galleon Group in 1997. Later, Mr. Far worked for him as an analyst.
In March 2008, Messrs. Far and Lee formed Spherix Capital in California, claiming Mr. Rajaratnam among their investors in a $200 million fund. One of the cooperating witnesses referred to in the complaint also once sought to work with Mr. Rajaratnam at Galleon, the people familiar with the matter say.
For weeks before Friday's arrests of Mr. Rajaratnam and others, some hedge-fund traders inside and outside Galleon had speculated that Messrs. Far and Lee were "wearing a wire" or turning state's evidence in the case, people close to the situation say. Indeed, Mr. Rajaratnam and one of the ex-Bear Stearns traders, Danielle Chiesi, had suspicions that Messrs. Far and Lee might be providing information to the government in an insider-trading case, a person close to the situation says.
Their suspicions grew when Messrs. Far and Lee Abruptly closed their hedge fund in March 2009, despite strong investment performance during its inaugural year, according to people close to the situation. Their fund, which was concentrated in technology stocks, was up roughly 10% for the year before they closed, people close to the situation say.
The criminal complaints filed in a New York federal court allege activities of cooperating witnesses in three instances - referring to a "CW" in the Rajaratnam case and "CWI" and "CW2" in the Chiesi case.
It is unclear if Messrs. Far's and Lee's conversations and their efforts to cooperate with the government are among those cited in the complaints against Mr. Rajaratman and Ms. Chiesi. The government's case also involves cooperating witnesses whose actions aren't cited in the complaints, a person familiar with the situation says.
- Courtesy The Wall Street Journal |
E-mail