By Siow Li Sen

The assets of Galleon Group have not been frozen by the US authorities and there should be no hold up in returning money to investors, a source familiar with the matter said.

More than 90 per cent of the funds are now in cash, he said in an update on the unwinding of the US$3.7 billion portfolio as the hedge fund prepares to return money to investors following the shocking arrest of founder Raj Rajaratnam two weeks ago.

The US$3.7 billion includes the US$500 million managed by its Singapore outfit, Galleon Asia which is run by former senior DBS executives, Frank Wong and David Lau.

Some people have raised questions on whether there would be a hold up in redemption requests because the long arm of the US investigators might try to get a court order to freeze the hedge fund's worldwide assets.

'It hasn't occurred,' the source told BT.

According to the source who is not a lawyer, an application to freeze the assets usually happens at the beginning when the charges are read out.

Since there was no such application then, 'it may not happen,' he said.

'I understand that in the US it is not a straightforward matter to get an injunction on worldwide assets,' said Joy Tan, WongPartnership partner, commercial and corporate litigation practice.

The US Securities and Exchange Commission has charged Rajaratnam, the 52-year-old Sri Lanka-born billionaire, and five executives from other US companies with the largest hedge fund insider-trading scheme in the United States. He is out on US$100 million bail.

As for the unwinding of the funds, there was 'little leakage' the source said despite the recent slide in equity markets.

Nervous investors have until Nov 15 to put in their redemption requests for payments on Jan 1, 2010.

The company has also been approached by investors looking to buy over the operations, either in their entirety or separately, he said.

The source said the potential buyers are those who see this as an opportunity to gain a presence in Galleon's very successful long/short equity and macro strategy and hire some very talented people.

'Not all funds have that investment style,' the source said.

Hedge fund players here who too have been shocked by the developments including the revelation that the US investigators had used wiretaps during their probe said there could be a slight chilling effect.

'I don't think investors should be worried about wiretaps so long as they're having legitimate and legal conversations,' said Peter Douglas, founder of hedge fund consultancy GFIA.

'The world is becoming a smaller place and, with technological advancements, we have less and less of an expectation of privacy,' said Stefanie Yuen Thio, head, corporate, TSMP Law Corporation.

'If they were doing something illegal on the phone calls, then they deserve to be brought to justice. However, I think the fear is that in situations where there is a legitimate expectation of privacy and where confidentiality is the cornerstone of commerce, wiretaps could erode our ability to do business effectively,' said Mrs Thio.

'I guess the day is not far away when we will arm our receptionists with equipment to do a wiretap sweep of the meeting rooms before we start discussions,' she said.

Mr Douglas thinks the arrest is a reflection of regulators flexing their muscles.

'Not so much because of the specifics of the case but because it's another case of the hawks within regulators globally stretching their wings.'

The Monetary Authority of Singapore said earlier this month that it is 'monitoring market developments and global initiatives, and will fine-tune our regulatory approach as appropriate.'

Since September, Hong Kong's Securities and Futures Commission has had 10 successful convictions for insider trading over the previous 13 months.

This article was first published in The Straits Times.