FBI Raids Hedge Funds
The Wall Street Journal reports:
A three-year insider-trading investigation shifted into high gear Monday as government agents raided the offices of three large hedge funds, sending shock waves through the financial world.
In coordinated raids in New York, Connecticut and Massachusetts, Federal Bureau of Investigation agents seized documents at the offices of Level Global Investors LP, Diamondback Capital Management LLC and Loch Capital Management LLC.
"The FBI is executing court-authorized search warrants in an ongoing investigation," said Richard Kolko, an FBI spokesman, who declined to comment further. Diamondback and Level Global confirmed the raids and said they were cooperating with the investigation. A lawyer for Loch Capital, Leonard Pierce, declined to comment.
Level Global and Diamondback are both run by former managers of Steve Cohen's giant SAC Capital Advisors hedge fund. A spokesman for SAC, which wasn't raided, declined to comment.
The raids, first reported on The Wall Street Journal's website, underscore the potential breadth of the investigation, which is being conducted by the FBI, the Manhattan U.S. Attorney's office and the Securities and Exchange Commission. More raids are likely in the next few days, according to people familiar with the matter.
The raids helped push the Dow Jones Industrial Average down about 150 points before a rally left the index down 24.97 points. Financial stocks were hit, with Goldman Sachs Group Inc. down 3.4% following news that investigators also were examining whether Goldman bankers had leaked information about deals. Goldman declined to comment.
The action Monday follows disclosure of the investigation by the Journal on Friday night. Authorities are worried about the potential for possible subjects of the overall probe to flee or destroy documents, say people familiar with the matter. Representatives of the Manhattan U.S. attorney's office, FBI and SEC declined to comment.
The Journal reported that federal authorities are preparing insider-trading charges that could ensnare consultants, investment bankers, hedge-fund and mutual-fund traders and analysts across the U.S., and that some charges could be brought by year-end.
A Diamondback spokesman said the firm "is fully operational" and continues "to manage the portfolio and Diamondback's business for the benefit of our investors."
At Level Global, roughly two dozen agents staged the raid, according to a person familiar with the matter. A Level Global spokesman said it is "fully operational" and continues "to work diligently for the benefit of our investors."
