Diamondback Trumpets Cooperation After Latest Arrest

Jan 20 2012 | 1:18pm ET

Its name once again dragged through the mud with the arrest of a former portfolio manager, Diamondback Capital Partners is again trying to reassure investors that their money is safe.

The Stamford, Conn.-based hedge fund has beaten the odds so far, surviving in spite of a raid of its office, the arrest of a former trader and some $2 billion in redemptions. But Tuesday saw the arrest of another former trader, Todd Newman, who was charged along with seven others with insider-trading.

Newman and three others, including a SAC Capital Advisors trader and a founder of hedge fund Level Global Investors, were arrested thanks to the cooperation of the three others charged in the case, all of whom have pleaded guilty. One of the cooperating witnesses is Jesse Tortora, a former Diamondback analyst and the alleged go-between in the ring, buying confidential information about Dell Inc. and trading it with his fellow alleged insider-traders.

But Diamondback said it "has been proactively assisting the U.S. Attorney's Office and the SEC since we became aware of the inquiry," Hedge Funds Review reports.

"The fruits of that cooperation are reflected in the charges filed and unsealed today against two former employees," Diamondback's Richard Schimel and Larry Sapanski wrote to clients. They called their cooperation "an important step in putting this matter behind us."

Newman's illegal trades earned Diamondback $3.9 million, according to the Securities and Exchange Commission. The firm, which has never itself been accused of any wrongdoing, settled with the SEC in August. It said that Newman was put on leave immediately after the Federal Bureau of Investigation's raid of Diamondback's offices last November.

Four hedge funds were raided that month. The other three, including Level Global, have since closed.


In Depth

Q&A: George Schultze On His Fund's Unique Approach to Distressed Investing

Apr 16 2015 | 1:01am ET

George Schultze is a managing member of Schultze Asset Management, a long/short...

Lifestyle

Puerto Rico Woos The Rich But So Far Gains Little

Apr 17 2015 | 2:45am ET

Hedge fund manager Rob Rill grins. He has just had word that U.S. financial regulators...

Guest Contributor

Minnesota Supreme Court Rejects The Ponzi Scheme Presumption: Lenders Claw Back Some Of Their Own Rights

Apr 17 2015 | 9:23am ET

A recent court ruling in Minnesota has put an end to the Ponzi Scheme Presumption...

 

Editor's Note