FBI raids hedge funds in US insider-trading probe

FBI agents raided three hedge funds 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 and the Stamford, Connecticut headquarters of Diamondback Capital Management, a law enforcement official said.

The FBI also executed search warrants at a third site, at 30 Federal St in Boston, Massachusetts, where hedge fund Loch Capital Management has its headquarters.

FBI spokesman James Margolin said the agency was “conducting searches in an ongoing investigation”. He would not comment further.

A spokesman for Level Global said the raid took place yesterday.

“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 last night.

“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.”

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 are both run by former managers of SAC Capital Advisors, of Stamford, Connecticut. Diamondback manages about €3.5bn, according to public filings. Level Global manages €2.3bn, filings show.

Loch Capital is run by brothers Timothy and Todd McSweeney. The brothers have been linked in news reports to hedge fund manager Steven Fortuna. Fortuna pleaded guilty last year to charges stemming from an earlier insider trading investigation by the Securities and Exchange Commission.

The raids come a month after US Attorney Preet Bharara in Manhattan told the New York City Bar Association that white-collar crime was on the rise, carried out by Wall Street heavyweights who considered inside information “a performance enhancing drug that provides the illegal ’edge’ to outpace their rivals and make even more money”.

Mr Bharara said his office and the FBI had recently added more resources to exposing insider trading and considered it a top criminal priority.

“Disturbingly, many of the people who are going to such lengths to obtain inside information for a trading advantage are already among the most advantaged, privileged, and wealthy insiders in modern finance,” he said last month.

Diamondback portfolio manager Andrea Feinstein declined to comment about the search. A spokesman for the SEC did not respond to requests for comment.

Calls to Loch Capital were not returned. Leonard Pierce, a lawyer for the fund, did not return a call seeking comment.