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Barai Capital caught in insider trading scandal, fund was just starting to actively raise capital

Monday, January 31, 2011
Opalesque Industry Update – Two-year-old firm, Barai Capital was just starting to move to actively boost the $100m in assets the firm had from seeder Protégé Partners and other early investors, when involvement in the recent insider trading scandal unraveled the business. Reports by news outlets on Monday confirmed Barai Capital to be the unnamed firm raided during the November FBI sting operation, and investors confirmed that the fund was being unwound in an orderly fashion.

“We have generated a cumulative net return of over 13% in 2.5 years…The firm now manages just under $100m with a team of five professionals. We would like to now add to that capital in order to take advantage of the tremendous opportunities we are seeing right now in the technology space,” said Portfolio Manager and Principal Sam Barai, during the latest Opalesque New York Roundtable. Barai, who spoke at the Opalesque Roundtable only a few weeks before the raid on his offices, described himself as a “technology geek”. Prior to launching his own firm he worked with Ziff Brothers Investments before managing a successful equity long/short fund (focused on tech-telecom-media stocks) for Citigroup’s Tribeca Global Management prior to the financial crisis.

Prosecutors have not disclosed charges in the wrongdoing against Mr. Barai or his firm, but the WSJ reported that people familiar with the case identified Sam Barai as a co-conspirator. Reports published throughout the day on Monday say Barai received inside information on Marvell Technology and Nvidia from Ms. Jiau (Winifred Jiau, charged in December with conspiracy and securities fraud).

Ironically, during the Opalesque Roundtable, Barai discussed the investor wariness following major hedge fund frauds such as Madoff, that made raising assets for new funds more difficult than in years prior. “Investors have been more focused on investing with the largest hedge funds with well known prime brokers, auditors, and administrators. We have always worked with a well-established network of service providers, which should give potential investors more confidence in Barai Capital even if our assets are not in the billions of dollars,” said Barai.

For the full transcript of the Opalesque New York Roundtable see: Source

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