Galleon Funds Get Hit By Massive Redemptions After Founder’s Arrest (IBM, JAVA, GOOG, AMD, BAC, BCS,ANAD, EBAY, AAPL)

According to the Wallstreet Journal, Galleon Group, has been experiencing an increased amount of redemption requests after the arrest of their co-founder, Raj Rajarantam for allegedly getting insider information on several companies including IBM (NYSE: IBM), Sun Microsystems (NASDAQ: JAVA), Google (NASDAQ: GOOG), AMD (NYSE: AMD) and Hilton Hotels. Investors of the fund have requested to withdraw around $1.3 billion from the $3.7 billion that it manages.

The soonest that the investors can withdraw their money is January 1st because most Galleon Funds only allow quarterly withdrawals. The technology fund headed by Rajaratnam allows for monthly redemption but it requires a 45 day notice.

In addition, Bank of America Merill Lynch (NYSE: BAC) and Barclays (NYSE: BCS), two brokers that Galleon deals with have stopped trading securities with them because of fear that their assets would be frozen. Some companies are also looking to drive down the prices of stocks that Galleon owns as Anadigics (NASDAQ: ANAD) dropped 20 cents to $4.30/share.

The large holdings of Galleon in Google, Ebay (NASDAQ: EBAY), and Apple (NASDAQ: AAPL) are relatively unaffected.