"Galleon was shocked to learn today that Raj Rajaratnam was arrested this morning at his apartment," the firm said in a statement. "We had no knowledge of the investigation before it was made public and we intend to cooperate fully with the relevant authorities. Galleon continues to operate and is highly liquid."

The U.S. Securities and Exchange Commission complaint said that Rajaratnam didn't deserve his reputation for "genius trading strategies" or "astute study of company fundamentals or marketplace trends."

Prosecutors said that they have been investigating the case since at least November 2007, when a person they don't name in the complaint began meeting with agents of the FBI. The person, who has pleaded guilty and is cooperating with authorities, used inside information to trade securities and had tipped Rajaratnam since 2006, prosecutors said.

The person, who had also sought a job at Galleon in 2005, helped prosecutors by 'making consensual recordings of four telephone conversations' with Rajaratnam, the complaint says. "There are numerous conversations that are recorded that very clearly depict the fact that this defendant engaged in a veritable smorgasbord of insider trading activities," Klein said in court. He added that Rajaratnam instructed colleagues to create e-mails designed to hide his source of information and "would make trades intended to mask his illegal activity."