by ilene - October 30th, 2009 11:28 am
Here’s an update on R-Squared’s encounter with the law and a look at Galleon’s impressive but tainted returns. – Ilene
Courtesy of Market Folly
It’s been a little while since we checked in on the happenings at the current circus known as Galleon Group so we wanted to cover all the updates. Raj Rajaratnam’s (R Squared) hedge fund is involved in one of the largest insider trading cases to rock Wall Street. But, of course, Raj says he is innocent in his letter to investors:
"October 21, 2009
Dear Galleon Employees, Clients and Friends,
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. At this important time, I want to reassure investors of the liquidity of our funds and assure Galleon employees that we are seeking the best way to keep together what I believe is the best long / short equity team in the business.
As many of you know, we have built our business on the fundamental belief in rigorous investment analysis combined with active trading around core positions. We have encouraged and invited our investors to attend our daily research morning meetings. Many of you have done so and got a first hand look at our process. This research process is the core of our investment and trading strategy.
The privilege of managing investors’ capital is a responsibility that I have always taken very seriously. I want to reiterate that I am innocent of all charges and will defend myself against these accusations with the same intensity and focus I have brought to managing our investors’ capital.
For those who have been my partners and supporters over the last 17 years, I sincerely thank you. I also want to thank you for the innumerable expressions of support I have received from you over the past few days.
Sincerely
Raj Rajaratnam"
So, he says he is innocent yet he is winding down the funds… hmm. That probably has something to do with the fact that over the course of 3 days, he received $1.3 billion in redemption requests. On that note, it looks like he was
…
Tags: Galleon, insider trading charges, Raj Rajaratnam, Scandal, Wall Street
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by ilene - October 22nd, 2009 4:48 am
Courtesy of The Pragmatic Capitalist
Reader DanH was nice enough to forward us a recent copy of Galleon Groups performance going back to 1992. It turns out that the fund was Madoff-like in its performance. These guys just couldn’t lose. Whether the market was up or down they cranked out 25% returns like they were printing money. It makes you wonder just how long these guys were trading on insider information?
I have run the risk adjusted returns on hundreds if not thousands of portfolios throughout my career and I have never seen numbers like these. NEVER. There is virtually ZERO downside volatility in these figures. Their largest one month drawdown was -6.19%! That is simply unheard of for a portfolio with such high returns. Gauging from the returns I would be willing to bet the insider trading was going on for most of Galleon’s existence and was likely much more rampant than currently reported:
Tags: Galleon, insider information, Raj Rajaratnam
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by ilene - October 16th, 2009 6:44 pm
Courtesy of John Carney at Clusterstock
Traders at hedge funds and Wall Street trading desks are quaking over the news that the FBI tapped the phone lines of Galleon founder Raj Rajaratnam.
The news that the government is (finally) employing techniques typically used against organized crime or international drug cartels is raising fears about who might be next.
We spoke to traders at two prominent hedge funds who both described the feeling at their firms as “panicked.”
“Suddenly you are wondering about every conversation you’ve had about a public company, wondering if the Feds were listening in,” one trader said.
Traders spend a lot of time exchanging information with colleagues and reaching out to people in the industries they cover in hopes of gaining an edge. Rumors, gossip and loose talk are their bread and butter.
Most of this is fair game. But if the ultimate source is an insider or the news is about a major deal that has yet to be announced, the trader can step into dangerous legal territory.
Even when traders learn inside information, there is usually little chance of getting caught. The SEC watches unusual trading activity but an active trader will usually get a pass if he’s buying or selling stocks that he usually trades in anyway.
Even those cases that do come up are hard to prosecute, especially if no one confesses. So occasional civil cases are brought but almost no criminal cases emerge involving traders.
This case shattered that pattern because the government used the tools it uses against hardcore drug criminals and terrorists to uncover the alleged insider trading.
Traders are now living in a very different world. Legally speaking, trading is far more dangerous than anyone knew.
See Also:
Raj Rajaratnam Funded Sri Lankan Terror Group
Galleon "Shocked" By Raj Rajaratnam Arrest
Will Raj Rajaratnam Spend 200 Years In Jail?
Previously, John Carney reporting:
Prosecutors and the FBI have announced that they have filed charges against several people involved with the Galleon Group hedge fund, including founder Raj Rajaratnam. Galleon is a major hedge hund player known for its investment in technology stocks…
Most notably, the government is filing criminal…
Tags: Crime, Galleon, Hedge Funds, indictment, insider trading, Legal, Raj Rajaratnam, regulation, Scams, SEC, stocks, Wall Street
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW.