Thursday, 5 May 2016
Last updated 3 hours ago
May 31 2011 | 9:43am ET
Loch Capital Management, the now-defunct Boston hedge fund, has maintained since the Federal Bureau of Investigation raid of its offices in November that it is not a target of the Justice Department's ongoing insider-trading probe. But, according to recent court filings in that case, the Feds aren’t so sure.
The FBI suspected co-founder Todd McSweeney of using expert network Primary Global Research to obtain confidential information, the filing in the case against Primary Global's James Fleishman shows. Indeed, a cooperating witness recorded a conversation with McSweeney in April 2009 in which he allegedly admits paying Primary Global "to arrange for conversations with PGR's consultants or experts who provided McSweeney with inside information.
Loch Capital closed last year after investors inundated the once-$2 billion firm with redemption requests. The firm had already suffered major withdrawals due to McSweeney's friendship with S2 Capital Management founder Steven Fortuna, who pleaded guilty in the Galleon Group insider-trading case.
Loch Capital isn't the only major hedge fund named in the Fleishman filing: Prosecutors told Fleishman's lawyer that they have more than 1,800 recordings, more than 4,000 pages of documents and e-mails from 100 people, as well as instant message conversations between Primary Global employees and employees of Balyasny Asset Management, Coatue Management and SAC Capital Advisors.
No current employees of any of those firms has been charged, although two former SAC managers have pleaded guilty in the expert network case.