Execution of a search warrant can be the kiss of death for a hedge fund manager, even if the search uncovers no wrongdoing. Criminal and even regulatory investigations can result in a spate of redemption requests. Within months after the FBI and U.S. Attorney executed a search warrant in November 2010 at the offices of hedge fund manager Level Global Investors, L.P. (Level), as part of their widely-publicized campaign against insider trading by hedge funds, Level shut its doors. Anthony Chiasson, one of Level’s co-founders, was eventually convicted of insider trading; his conviction was recently reversed on appeal
. Although named personally in the warrant, Level co-founder David Ganek was never charged with a crime. Ganek is now striking back. In a civil complaint recently filed in the U.S. District Court for the Southern District of New York that names as defendants U.S. Attorney Preet Bharara and other high-level prosecutors and FBI officials, Ganek accuses certain U.S. prosecutors and FBI agents of fabricating the evidence that led to Ganek being named in the warrant. This article summarizes Ganek’s complaint. For a discussion of the alleged insider trading scheme that led to Level’s demise, see “SEC Files Civil Insider Trading Complaint Against Diamondback Capital Management, Level Global Investors and Seven Individuals Based on Trading in Dell and Nvidia; Diamondback Strikes Non-Prosecution Deal with U.S. Department of Justice and Settles with the SEC for $9 Million
,” Hedge Fund Law Report, Vol. 5, No. 4 (Jan. 26, 2012). For additional coverage of actions involving Level and its employees, see “The Newman-Chiasson Decision: Cold Comfort for Hedge Fund Managers
,” Hedge Fund Law Report, Vol. 7, No. 47 (Dec. 18, 2014); and “SEC’s Insider Trading Suit against Former Level Global Trader Illustrates the Risk of Retaining a Former Public Company Employee as a Consultant
,” Hedge Fund Law Report, Vol. 6, No. 47 (Dec. 12, 2013).