Too expert?

22 November 2010 By Richard Beales Follow @richardbeales1

Monday s raids of several funds offices seem to owe something to tracking the firms use of third party expert networks. These consultants risk unwittingly aiding the exchange of verboten information. So while the feds may yet come up empty, it s a reasonable place to poke.

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The FBI raided three hedge funds in connection with a widening probe into insider trading, the Wall Street Journal said on Nov. 22.

Diamondback Capital Management and Level Global Investors, two Connecticut funds run by former managers of Steven Cohen's SAC Capital Advisors, were among those raided, according to the report.

Also raided was Bostonbased Loch Capital Management, according to the report. Loch has had close ties with a witness who pleaded guilty in a separate insider trading probe centered on the Galleon Group hedge fund.

FBI spokesman Richard Kolko said the agency had executed search warrants in connection with an ongoing investigation. He declined to discuss the nature of the probe or the targets. A different FBI spokesman confirmed a raid took place at a downtown Boston building housing Loch Capital's offices.

Federal authorities may file a series of insider trading cases against hedge fund traders, consultants and Wall Street bankers within weeks, several lawyers familiar with the situation told Reuters.

Prosecutors and securities regulators are likely to file a number of cases targeting the $1.7 trillion hedge fund industry rather than a single spectacular case, said the lawyers, who have knowledge of the investigations but did not want to be identified since details have not been made public.

Context News

The FBI raided three hedge funds in connection with a widening probe into insider trading, the Wall Street Journal said on Nov. 22.

Diamondback Capital Management and Level Global Investors, two Connecticut funds run by former managers of Steven Cohen's SAC Capital Advisors, were among those raided, according to the report.

Federal authorities may file a series of insider trading cases against hedge fund traders, consultants and Wall Street bankers within weeks, several lawyers familiar with the situation told Reuters.

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