Fourth Hedge Fund Raided In November In Insider Probe

Jan 10 2011 | 4:32am ET

The Federal Bureau of Investigation raided an unidentified hedge fund about a week before raiding three other hedge funds.

The previously unknown search came to light in the case against Winifred Jiau, the seventh person arrested in the Justice Department’s ongoing insider-trading investigation. The complaint against Jiau, a former consultant for expert network firm Primary Global Research, alleges that she passed confidential information to two hedge fund traders who worked at three different hedge funds.

None of those hedge funds were identified, except as “Hedge Fund A” and “Hedge Fund B.” The complaint says that a cooperating witness in the case worked at Hedge Fund A and “understood that Jiau obtained the information” she passed on “from a source who was not authorized to disseminate it.”

Hedge Fund A was the firm raided about a week before the Nov. 22 raids of Diamondback Capital Management, Level Global Advisors and Loch Capital Management, Reuters reports. Initial speculation that Hedge Fund A was denied by Level Global and dismissed by Reuters’ sources.

“The press has speculated that Level Global is the ‘hedge fund located in New York, New York’ referred to in recent complaints filed by the government, and that one of the confidential cooperating witnesses is a Level employee or former Level employee,” the firm wrote to investors last week.

“Based on all of our work and analysis, we have concluded that these complaints do not appear to be referencing Level or Level personnel,” it said, although it did say it was cooperating with the investigation.

Hedge Fund A is based in Manhattan and is a small fund; Level Global is based in Manhattan but manages about $4 billion.

The search warrant for Hedge Fund A’s offices was signed by a federal judge “on or about Nov. 12, 2010,” according to the complaint against Jiau. The warrant allowed the FBI to seize some computers and tape recorders from the firm.


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