Diamondback Founders Plan New Hedge Funds

Aug 14 2013 | 9:34am ET

The co-founders of the shuttered Diamondback Capital Management are plotting their return to the hedge fund industry—separately.

Lawrence Sapanski and Richard Schimel each plan to launch equity hedge funds. Sapanski's Scoria Capital Partners will utilize Diamondback's long/short equity strategy. Schimel's firm will be called Sterling Ridge Capital Management.

Scoria's will be based in Greenwich, Conn., and is expected to launch its maiden fund in the first quarter of 2014, Absolute Return reports. Schimel's Sterling Ridge will be based in New York.

Sapanski and Schimel closed Diamondback in December, more than two years after it was raided by the Federal Bureau of Investigation as part of an insider-trading probe. Neither Sapanski nor Schimel were ever accused of wrongdoing—former Diamondback portfolio manager Todd Newman was convicted of fraud in December and sentenced to four-and-a-half years in prison—and Diamondback soldiered on even as the three other hedge funds raided closed their doors. But they pulled the plug in the face of another $520 million in redemptions, which cut the firm's assets to $1.45 billion—down from $5.8 billion at the time of the raid.

In addition to Newman, two other former Diamondback employees, portfolio manager Jesse Tortora and portfolio manager Anthony Scolaro, pleaded guilty to insider-trading.

Sapanski and Schimel set Diamondback up in 2005. Both men formerly worked at SAC Capital Advisors, and Schimel is SAC founder Steven Cohen's brother-in-law.

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