The huge insider trading investigation just ensnared the hedge funds Diamondback and Level Global in its vast web, says the Wall Street Journal.The two Connecticut-based hedge funds were raided by Feds this morning.
What’s really interesting is that both funds raided are run by former SAC traders. So suspicions that the government is targeting Steve Cohen, the fund’s manager, are seeming ever more likely.
Here’s what we know about the two funds.
Diamondback, which confirmed the raid to CNBC and said they are cooperating, is run by Larry Sapanski and Richard Schimel, who both left SAC around 2004.
Diamondback runs about $5.3 billion and is located in Stamford, the same town as SAC Capital. The firm owns or owned HGSI, the investment that triggered rumours of insider trading by Chip Skowron at FrontPoint, so that may be why the firm was raided.
And itt may not be related but in 2009, Diamondback was fined by the SEC for improper short sales (5 days before an IPO) of Axis Capital holdings, Endurance Specialty Holdings, Everest Re Group, and IPC Holdings. They profited just $94,014 on the short sales. (Download the details by clicking here.)
It’s also noteworthy that the fund has been experiencing some high-level turnover lately.
One of the firm’s three co-founders, Chad Loweth, left in June, around the time that the insider trading investigation seems to have been taking shape.
And a top Diamondback trader, Larry Petrella, recently bolted the fund and joined Tudor.
Level Global, founded in 2003 by David Ganek fellow SAC alum Anthony Chiasson, manages around $4 billion.
Ganek is popular on the New York art scene – he’s a big time collector and he’s a trustee of the Guggenheim. He followed his dad, Howard, into finance. Howard Ganek was a partner at Neuberger Berman.
The firm replied to an email commenting on the charges by saying that the firm is “fully operational.”
Level Global, located in Greenwich, CT, has also been hit by high-level employee turnover. Last year, Randy White, a senior professional from Level Global Investors, left the firm and got rumour mills swirling.
Interestingly, Goldman Sachs, some of whose employees people suspect will be named in the investigation, was said to invest in the fund this summer. Reportedly, Goldman’s buyout unit purchased a minority stake in the fund.
More to come.