Galleon moved into venture capital in August 2007, opening an office on storied Sand Hill Road in Menlo Park, Calif., and hiring half a dozen investors as it looked to invest $300 million in late stage private companies that were preparing to go public.
As investment banks crumbled and the markets started to dive last year, investors that had been hired to work on the firm’s crossover fund left the firm and Galleon quit participating in late stage financings, according to public documents.
Early last week, billionaire Raja Rajaratnam, founder of the hedge fund, told employees and investors that the $3.7 billion fund was winding down. That development came as U.S. prosecutors and the FBI charged him and five others in a criminal complaint of running an insider trading network that allegedly made more than $20 million in illegal profits.
Four of those charged lived in the greater New York area and two,
U.S. authorities describe the situation as the biggest hedge fund insider trading case ever. Late last week, Rajaratnam, 52, met the conditions of his $100 million bond and signed a document known as “a confession of judgment” in the Manhattan federal court, putting up his luxurious apartment on the Upper East Side.
Prosecutors say that a hedge fund employee tipped off an informant for Rajaratnam about Google’s disappointing second-quarter earnings before its release in July 2007, leading the hedge fund to net $9 million in profits from illegal trades.
As the investigation continues, the hedge fund has a few private companies in its portfolio for which it will likely be looking to sell on the secondary market. During the short run of its technology crossover fund, Galleon managed to invest in at least six companies, according to public documents, including:
Meanwhile, managers of Galleon’s $500 million Asia fund are exploring a possible buyout of the unit, sources told Reuters last week. A “management buyout is the most logical option,” said one of the sources, who declined to be identified because the talks were not public.
The regional management team in Singapore, including Chairman Frank Wong and CEO David Lau, are trying to attract outside investors. Lau told Reuters that the Asia fund had reduced leverage and was staying liquid.
Reuters contributed to this report.