Updated from 1:10 p.m.

The bears have gotten the better of

Ritchie Capital

.

The $2.8 billion hedge fund founded by former Chicago Bears player A.R. Thane Ritchie is selling the assets in its main fund after two years of lackluster returns and attempts to keep its investors from pulling out their money.

The hedge fund, which is based in Illinois but has offices in New York and California, notified investors of its decision in a Tuesday email. News that Ritchie was selling the assets in its Multistrategy Global Fund was first reported by

Bloomberg

.

A Ritchie spokesman says the hedge fund is close is to selling the Multistrategy fund's assets to a third-party investor. It plans to return any proceeds from the asset sales to its investors. A source says the assets up for sale could be valued between $700 million and $1 billion.

Justin Meise, a Ritchie spokesman, says the Multistrategy fund is "not closing'' and plans to keep operating after the asset sale. He says Ritchie decided to sell the fund's assets after being approached by a number of buyers. Meise says the buyers approached Ritchie after the hedge fund struck a deal with its investors that gave them incentives not to redeem their money.

The past several years have been rough for Ritchie. The hedge fund has been implicated but not charged by regulators in the mutual trading scandal. Regulators have alleged that a number of brokers, including some from

Prudential

(PRU) - Get Report

and

Bear Stearns

(BSC)

, helped executive so-called market-timing trades for Ritchie.

Market timing is a legal but frowned upon trading strategy in which a trader frequently trades shares of a mutual fund in order to take advantage of pricing discrepancies. It is one of the trading practices regulators cracked down on in the three-year-old mutual fund scandal.

Ritchie, sources say, has been negotiating a possible settlement with the Securities and Exchange Commission for a long time.

A person familiar with Ritchie says most of those market-timing trades went through the Multistraegy fund. This person says Ritchie's decision to liquidate the fund is surprising.

Last year Ritchie began negotiating with its investors to prevent them from pulling money from the Multistrategy fund. The negotiations began after Ritchie unilaterally

tried to change its rules on investor redemptions. Two months ago, it appeared Ritchie and the investors had reached a deal that that would permit the Multistrategy fund to keep operating as planned.

But then Meise says prospective buyers for the fund's assets emerged. He declined to disclose any information about the potential buyer.