Boston/New York, Oct. 21 (Reuters): Hedge fund firm Galleon Group said it was winding down its funds, less than a week after its founder was arrested and charged with running one of the biggest insider-trading schemes.

“I have decided that it is now in the best interest of our investors and employees to conduct an orderly wind down of Galleon’s funds while we explore various alternatives for our business,” Raj Rajaratnam, the firm’s 52-year-old billionaire founder, said in a letter to investors and employees today.

Galleon, which managed $3.7 billion at the end of last week and boasted strong returns through September, has attracted some potential buyers, a source — who declined to give further details — said.

Rajaratnam and five other individuals are accused of illegally trading on non-public information. Prosecutors say the scheme netted more than $20 million.

News that Galleon is closing down did not surprise investors and analysts.

Rajaratnam’s arrest was thought to be a fatal wound for the 12-year-old firm.

Investors ranging from college endowments to wealthy individuals began demanding their money back immediately after the news of the arrest broke on Friday.

Galleon analysts and portfolio managers are beginning to seek employment elsewhere, with many worried that their time at the firm might hurt them with future employers.

Rajaratnam, who has said he is innocent, stated in the letter that he planned to defend himself against the charges in the same way he managed money — with “intensity and focus”.

He said Galleon’s funds were liquid and its employees — roughly 130 people — “are seeking the best way to keep together what I believe is the best long/short equity team in the business.”

Despite these assurances, investors are determined to get their money out as quickly as possible.