A U.S. grand jury on Tuesday indicted the Sri Lanka-born U.S. Galleon hedge fund founder, Raj Rajaratnam, and co-defendant Danielle Chiesi on charges of securities fraud.

The 52-year-old, worth $3.7 billion in assets, was arrested on October 16 by agents of the Federal Bureau of Investigation (FBI) on charges of vast insider trading. He was among six persons arrested on charges of securities fraud and conspiracy to commit securities fraud.

A New York-datelined Reuters report said: “The indictment in Manhattan federal court, two months after the pair were charged along with others in a coast-to-coast probe on Oct. 16, lists 17 counts of conspiracy to commit securities fraud and securities fraud.

“Sri Lankan-born Rajaratnam and Chiesi, who worked with New Castle LLC hedge fund, are the only indictments returned so far in the case, which expanded in November to include 20 people facing criminal and civil charges.”

The wire agency quoted Mr. Rajaratnam’s lawyer John Dowd’s statement that after the indictment was returned, his client was innocent and that he looked forward to his day in court when a jury of his fellow citizens will examine and evaluate all of the evidence.

Mixed reactions in Sri Lanka

For Sri Lanka, the news would be received with mixed feelings and for understandable reasons. Rated as one of the richest businessmen in the world, Mr. Rajaratnam is reckoned to be Sri Lanka’s most affluent son of the soil. The founder and head of the New York-based Galleon Management hedge fund, Rajaratnam has a stake in the top 10 listed Sri Lankan companies.

Ironically, he has also been charged as a leading contributor of money to the LTTE. According to the Sri Lankan Defence Ministry, the LTTE’s arms procurer and Prabhakaran’s successor, Kumar Pathmanadan (aka KP), revealed the information during his interrogation. He is now in now in government custody.

“KP’s evidence of the LTTE receiving money from America’s biggest swindler of its stock market have been corroborated by two letters now in the hands of the U.S. intelligence,” the Defence Ministry said.

No end to travails

Despite his best efforts to contain the fall-out of the arrest, there is just no end to the travails of the business tycoon. Days after he wrote to the employees and clients of the Galleon group promising intended to “conduct an orderly wind-down” of the firm’s hedge funds, Mr. Rajaratnam was faced with a law suit in Newark, New Jersey, by a number of persons who identified themselves as victims of the LTTE’s terror acts and accused Rajaratnam and his father of knowingly helping the terrorist group.

Reports from the U.S. had said Mr. Rajaratnam was being sued for unspecified amounts in damages for the LTTE’s acts of violence. Jim Walden, his lawyer, was quoted as saying that the charges brought by the Sri Lankan victims were baseless. Besides, he lost the bid to reduce the value of his bail condition and sold off some of his firm’s holdings in Sri Lanka to partly finance his $100 million bail.

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