The Insider Trading Scandal Is Going To Cost Some Hedge Funds Half, If Not Everything, They Have

FrontPoint’s $3 billion man.

Just being named in the insider trading scandal is probably going to seriously damage the hedge funds that have been subpoenaed. And for Loch Capital, Level Global, and Diamondback, the hedge funds that have been raided by the FBI, because they’ve had search warrants acted out on them, they’re (most likely) done for. That’s what we’ve been hearing from several people, anyway.

In case you’re sceptical, just look at what’s happening to FrontPoint, the hedge fund where Chip Skowron, who (allegedly) traded on insider information he received from an “expert” in the healthcare industry, Dr. Yves M. Benhamou.

The Financial Times is reporting that the fund’s investors have requested to pull $3 billion out of the fund. That’s almost half of FrontPoint’s $7 billion AUM (assets under management).

And on top of that, senior staffers at FrontPoint are already interviewing for jobs at other firms, says the paper.

Dealbook‘s Peter Henning gives some perspective on why the same or worse will probably happen to the funds that have been raided. He says that the fact that a search warrant was issued and carried out means that “there is a good chance that securities laws were violated.”

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