Half of Investment Team Leaves Pirate Capital

In the latest upheaval in the hedge fund business, Pirate Capital, a $1.7-billion fund, said five of its 10 investment professionals quit or were fired two weeks after the firm came under regulatory scrutiny for possible securities law violations.

Pirate founder Thomas Hudson, in a letter sent Thursday to investors, didn’t say what led to the departures. He also said he would close the Norwalk, Conn.-based firm’s funds to new investments and concentrate on managing money rather than courting clients and overseeing his staff, according to the letter.

Pirate may have violated securities rules by belatedly disclosing the sales of its stakes in OSI Restaurant Partners Inc. and Freightcar America Inc., lawyers not involved in the matter said this month. The firm said it eventually publicly reported the stock sales after being contacted by the Securities and Exchange Commission.

The SEC is investigating Pirate, said a person with direct knowledge of the probe who declined to be identified. Hudson declined to comment.