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Archive for Tuesday, November 23, 2010

FBI raids 3 hedge funds in insider-trading probe

November 23, 2010

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— The FBI raided three hedge funds Monday in what one of the targets called a wide-ranging probe of insider trading in the financial industry.

Bureau employees searched the New York offices of Level Global Investors LP, and the Stamford, Conn., headquarters of Diamondback Capital Management LLC, a law enforcement official said. The official spoke on condition of anonymity because he was not authorized to discuss an ongoing case.

Another FBI official said the agency also searched a third site, at 30 Federal St. in Boston. Hedge fund Loch Capital Management LLC has its headquarters at that address.

The FBI said in a statement that it had executed search warrants in the three states “in an ongoing investigation.” Agency spokesmen said they could not comment further because the court documents are under seal.

A spokesman for Level Global acknowledged the raid took place Monday.

“We can confirm that agents from the Federal Bureau of Investigation visited our offices this morning as part of what we believe to be a broader investigation,” the spokesman said in a statement. “We are cooperating fully with the authorities and, at the same time, we are fully operational and continue to work diligently for the benefit of our investors.”

Four men wearing overcoats and badges emerged late Monday from the Level Global offices in midtown Manhattan, pulling rolling suitcases behind them and carrying nylon backpacks. They declined to answer reporters’ questions.

In Stamford, security guards ordered journalists to leave the premises of the high-rise building housing the offices of Diamond Capital Management. Three men were seen leaving the building in an FBI vehicle on Monday evening.

The FBI and other law enforcement agencies are investigating insider trading by hedge funds, mutual funds and investment bankers, the Wall Street Journal reported this weekend. The companies allegedly earned tens of millions in illegal profits using secret information about mergers, according to the Journal.

Diamondback and Level Global both are run by former managers of SAC Capital Advisors LP, of Stamford. Diamondback manages about $4.71 billion, according to public filings. Level Global manages $3.09 billion, filings show.

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