Galleon Funds to Unwind, Unloading Stocks

NEW YORK (TheStreet) -- Galleon Group, the hedge fund run by accused insider trader Raj Rajaratnam, will shut down and unwind its positions, according to a letter sent to its investors Wednesday.

The fund manages in the neighborhood of $3.7 billion and has been beset in recent days by clients wanting to withdraw their money (according to The Wall Street Journal, about $1.3 billion).

Galleon's letter to its clients, obtained by several news organs Wednesday, called the liquidation an "an orderly wind down." The letter also said Galleon would look into "various alternatives for its business."

Rajaratnam, meanwhile, has denied any wrongdoing, saying in the letter that he is "innocent of all charges."

Raj Rajaratnam, billionaire founder of the Galleon Group, a major hedge fund, is led in handcuffs from FBI headquarters.

Because most of the fund's stakes are in highly liquid assets, Rajaratnam wrote in the letter, converting those stakes to cash shouldn't pose a problem.

Still, at least some stocks -- the more lightly traded ones -- could take a hit in the Galleon sell-off. Already, the shares of chipmaker Anadigics(ANAD Quote) may have taken a dive on news of the Galleon unwinding, according to Galleon traders who spoke to Journal reporters (the fund owns some 1.2 million Anadigics shares.) The stock declined in price on Monday and Tuesday, but was rebounding sharply in Wednesday's session, climbing nearly 6% to $4.35.

Some of Galleon's traders believe that competing players will short some stocks in a bid to profit as the fund unloads its positions, the Journal said.

Galleon's traders conduct some 1,000 trades a day, and its positions sprawl over many asset classes, including bonds, options and ETFs.