Feds Open Euro Collusion Hedge Fund Probe

Mar 3 2010 | 6:50am ET

The U.S. government is investigating whether hedge funds are colluding to damage the value of the euro, after months of bearish bets against the currency.

The Justice Department last week sent a letter to several top hedge funds advising that it “has opened an investigation into agreements among various hedge funds that trade euro contracts,” The Wall Street Journal reports. The hedge funds, including Greenlight Capital, Paulson & Co., SAC Capital Advisors and Soros Fund Management, were all directed to “preserve all documents” relating to the euro, including trading records and e-mails.

The letter announcing the collusion probe came on the same day that the Journal ran a front-page article about hedge funds making a “career trade” against the European single currency. The article, which described the trades as similar to those against Lehman Brothers at the height of the financial crisis, revealed that at an “idea dinner” last month, top hedge fund managers, including those from Greenlight, SAC and Soros, agreed that the euro is likely to fall to parity with the U.S. dollar.

The euro currently fetches about $1.35.

SAC’s Aaron Cowen reportedly made the case for betting against the euro to a group that included Greenlight founder David Einhorn. The dinner on Feb. 8 in Manhattan was hosted by boutique research and brokerage shop Monness Crespi Hardt, also included talk on Greek debt by Brigade Capital’s Donald Morgan. Bearish bets on Greek debt have also aroused the ire of regulators on both sides of the Atlantic.


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