The Bermuda Stock Exchange (BSX) yesterday announced it had suspended the listing of New Castle Market Neutral Offshore Fund Ltd. after one of the principals of its US-based investment manager was arrested in a major insider trading case.

Mark Kurland, the co-founder of New Castle Funds LLC, was arrested on October 16, as well as Danielle Chiesi, a consultant on its hedge funds.

They were arrested along with four others, including Raj Rajaratnam, the billionaire founder of New York-based hedge-fund firm Galleon Group.

"We became aware that one of the directors of the fund had been arrested in the US," Greg Wojciechowski, president and CEO of the Bermuda Stock Exchange (BSX), said yesterday.

"We immediately suspended the fund's listing as a precautionary measure and as a prudent regulatory action."

Mr. Wojciechowski added that he was seeking clarification from the fund and its investment manager of how the arrest may impact the fund.

Yesterday New Castle Funds LLC said it had suspended 61-year-old Mr. Kurland following his arrest and had severed relations with Ms Chiesi.

"We were shocked and surprised by the serious and unfortunate events of October 16," the firm said in an e-mailed statement to the media. "We intend to cooperate with the authorities in their investigation."

Mr. Kurland started New Castle with Bob Reitzes in 1995 as part of Bear Stearns Cos.' asset-management unit. After the New York-based bank was bought by JPMorgan Chase & Co. last year, New Castle formed a joint venture with Mariner Investment Group, an investment firm managed by Bill Michaelcheck, according to New Castle's marketing documents dated January.

The case has attracted large media attention in the US, because of the involvement of Mr. Rajaratnam, who heads the $3.7 billion Galleon hedge fund and who is accused of conspiring to use insider information to trade securities in several publicly traded companies, including Google Inc.

Mr. Rajaratnam, 52, was ranked No. 559 by Forbes magazine this year among the world's wealthiest billionaires, with a $1.3 billion net worth.

Prosecutors who announced the case Friday said it was the largest ever brought against a hedge fund. The Securities and Exchange Commission, which brought separate civil charges, said the scheme generated more than $25 million in illegal profits.