FBI Raids Three Hedge Fund Offices And Gather Documents In Insider Trading Investigation

The raids followed reports that authorities were preparing insider trading charges against the $1.7 trillion hedge fund industry. Charges could be filed before year end, which would follow those already filed against Raj Rajaratnam and his hedge fund, Galleon Group. Twenty three former hedge fund managers, lawyers and others have faced criminal or civil charges in what has been tagged the largest insider trading case in hedge fund history. There have been fourteen guilty pleas and eight not guilty, so far. The insider trading investigation is said to involve investment bankers, consultants and hedge fund traders.

According to reports in the Wall Street Journal on November 22, 2010, FBI agents raided the offices of Diamondback Capital management and Level Global Investors in Connecticut. They are both run by former managers of Steve Cohen’s SAC Capital Advisors. A third firm, Loch Capital Management is based in Boston. Diamondback began in 2005 is based in Stamford, Connecticut and oversees more than $5 billion in assets. Level Global was started in 2003 and was managing roughly $4 billion in assets. Finally, Loch Capital had around $750 million in assets as of the beginning of the year.

Goldman Sachs shares have reacted negatively to the news, although the firm has not yet been implicated in the scandal. Time will tell if they are implicated.

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