Diamondback & Grand Jury Subpoena

Diamondback Hedge Fund Gets U.S. Grand Jury Subpoena

Bloomberg | by: Saijel Kishan and Patricia Hurtado

Diamondback Capital Management LLC, one of three hedge funds raided by the FBI last week, said it received a federal grand jury subpoena and is cooperating in a U.S. probe that it said includes research consultants.

The firm, based in Stamford, Connecticut, said it was told by the government it isn’t the target of the probe and that the raid was focused on one of its portfolio managers, who was put on leave, according to a letter to sent to investors yesterday.

“The warrant appears to be focused on a single employee (a portfolio manager), as well as on a former employee who reported to that employee,” Diamondback co-founders Lawrence Sapanski and Rich Schimel said in the letter, a copy of which was obtained by Bloomberg News. “One of the principal areas on which the government appears to be focused is the use of industry research consultants.”

Hedge funds Level Global Investors LP and Loch Capital Management also had their offices raided by the FBI on Nov. 22. Janus Capital Group Inc. and Wellington Management Co. were among firms that received information requests last week as part of the government’s insider-trading investigation.

Level Global, with offices in New York and Greenwich, Connecticut, said in a letter to investors that it met with the U.S. Attorney’s Office on Nov. 23 and that the government said yesterday it wasn’t a target of the probe.

“Nor, in fact, has the firm been alleged to have engaged in any misconduct or wrongdoing,” Level Global said in the letter, a copy of which was obtained by Bloomberg News.

Holder Confirms

U.S. Attorney General Eric Holder confirmed yesterday that the Justice Department is conducting a criminal investigation related to illegal trading on Wall Street.

In response to questions about the probe of insider trading, Holder said an “investigation is ongoing” and described it as “very serious.” Holder was questioned at a news conference at the Justice Department in Washington.

“I don’t want to get into the details,” he said. The investigation is being conducted by the office of U.S. Attorney Preet Bharara in Manhattan, Holder said.

Jessie Erwin, a spokeswoman for Bharara’s office, declined to comment on the investigation. Jim Margolin, a spokesman for the Federal Bureau of Investigation’s New York office, also declined to comment.

Diamondback said yesterday that the federal grand jury subpoena it received “is similar to those received by many other market participants.”

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