A Sri Lanka-born U.S. billionaire, arrested in connection with the largest ever hedge-fund insider trading case in America on Friday, was probed earlier for allegedly raising funds for the Liberation Tigers of Tamil Eelam (LTTE), a media report said on Sunday.

As part of the probe, investigators uncovered documents showing that Raj Rajaratnam was among the several wealthy Sri Lankans in the U.S. whose donations to a Maryland-based charity made their way to the Tamil Tigers, The Wall Street Journal said, quoting people familiar with the probe.

Mr. Rajaratnam, 52, founder of the Galleon Group, was arrested along with two Indian-Americans, Anil Kumar (51) and Rajiv Goel (51), and three others in the $20 million hedge-fund scam.

He was charged with securities fraud and conspiracy to commit such fraud. However, there appeared to be no connection between the two investigations, the paper said.

Mr. Rajaratnam’s attorney Jim Walden said his client was innocent and would fight the insider-trading charges, the newspaper said. The Tamil-origin billionaire made charitable donations “to rebuild homes” destroyed by the devastating tsunami in Sri Lanka and other Indian Ocean nations in 2004, but had no links to the LTTE, the newspaper quoted him as saying.

Mr. Rajaratnam was probed but not charged in the terrorism investigation led by the Federal Bureau of Investigations and federal prosecutors in Brooklyn.

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