FBI Raids Three Hedge Funds In Insider-Trading Probe

Nov 22 2010 | 3:50pm ET

Agents from the Federal Bureau of Investigation today raided the offices of three hedge funds as part of a larger insider-trading investigation.

Diamondback Capital Management and Level Global Investors were the targets of the searches, conducted by the FBI's New York and New Haven, Conn., offices. Diamondback is based in Stamford, and Level Global in Greenwich.

The Feds also raided the office of Boston-based Loch Capital Management, according to published reports.

Richard Kolko, a spokesman for the FBI, said that the search of Diamondback's office was still ongoing and that "all matters regarding this matter remain under seal." The FBI also confirmed that a search warrant had been executed at Level Global.

Andy Merrill, a spokesman for Level Global, told Bloomberg News that the hedge fund was "cooperating fully." A spokesman for the hedge fund also told The Wall Street Journal that it believes the raid is "part of what we believe to be a broader investigation of the financial services industry discussed media reports over the weekend."

That "broader investigation" is a three-year-long probe into insider trading that could ensnare some of the world's top hedge funds. Dozens of hedge funds have been subpoenaed in the matter, and the first charges could be filed within weeks.

Both Diamondback and Level Global were founded by alumni of SAC Capital Advisors, believed by some to be a target of the investigation. Former SAC analyst Jonathan Hollander is known to have provided at least two statements to prosecutors over the past year-and-a-half. Those statements came to light as part of a separate insider-trading case that produced the conviction of former Jefferies Group hedge fund manager Joseph Contorinis last month.

Diamondback has more than $5 billion in assets under management and Level Global about $4 billion.


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