Thursday, April 28, 2011

Happy Hedge Fund Raid Day!: Six Hedgies to Know.

So the FBI is getting all Eliot Ness today, uncorking raids of hedge funds in Connecticut and Boston. The Journal has the coverage here, saying the sweeps by the Feds are tied to the big insider trading story it broke over the weekend:

The offices of Diamondback Capital Management LLC and Level Global Investors LP were raided. Both hedge funds are run by former managers of Steven Cohen’s SAC Capital Advisors.

The third firm raided is Loch Capital Management LLC, based in Boston, people familiar with the matter say. Leonard Pierce, a lawyer for Loch Capital, declined to immediately comment.

“The FBI is executing court-authorized search warrants in an ongoing investigation,” said Richard Kolko, an FBI spokesman, who declined to comment further.

So, it’s still early in what Bess Levin over at DealBreaker is calling Insider Trading Fest(ivus) 2010. But we figured we’d lay out some of the leading characters at the firms that were paid a call by the boys in blue Monday. (We stress that nobody has been accused of any wrongdoing.)

Timothy and Todd McSweeney: The brothers founded Loch Capital, a Boston-based hedge fund manager that invests primarily in micro and small cap tech stocks, in 2002, according to a description of the fund on FactSet Lionshares. The Journal reports that the men are acquaintances with Steven Fortuna, a hedge-fund manager who pleaded guilty in the Galleon case and agreed to cooperate in that ongoing investigation.

David Ganek: The former SAC Capital trader and art collector founded hedge fund manager Level Global in 2003. “Level Global Investors invests long/short primarily in the stocks of US companies in the technology services, electronic technology and finance sectors. They invest mainly in mid- to large-cap companies and maintain a high turnover rate,” according to FactSet Lionshares. Back in April, Goldman Sachs’ buyout unit bought a minority stake in the fund.

Chad Loweth, Larry Sapanski and Richard Schimel: These former SAC traders started Stamford, Conn., based Diamondback Capital in 2005. Loweth left earlier this year. According to FactSet Lionshares, “the firm invests across all market caps. They tend to invest in the finance, retail and health technology sectors.”?Dow Jones Newswires reporter Joseph Checkler reported a few years back that Diamondback along with other SAC alums seemed especially enamored of biotech and healthcare stocks.

The Journal reached out for comment to all of the funds in question. Leonard Pierce, a lawyer for Loch Capital, declined to immediately comment. Messages left with Richard Schimel, Diamondback’s co-chief investment officer, and Diamondback’s general counsel, Joel Harary, on their office phones weren’t immediately returned.

A spokesman for Level Global said, “We can confirm that agents from the Federal Bureau of Investigations visited our offices this morning as part of what we believe to be a broader investigation of the financial services industry discussed in media reports over the weekend. 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.”

Meanwhile, over at The Big Picture, Barry Ritholtz is wasting no time in raising the key question of the moment.

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