Partners at New Castle, the former Bear Stearns hedge fund embroiled in an insider trading crackdown by US authorities last month, have told investors they are moving to establish a new fund in order to distance themselves from Mark Kurland, the firm’s founder.

The move comes after Mr Kurland and a consultant to New Castle, Danielle Chiesi, were arrested by US authorities in October alongside Raj Rajaratnam, the founder of Galleon Group, another large US hedge fund.