Execution of a search warrant at a hedge fund manager’s business premises can be catastrophic. That was the case for Level Global Investors (LG), which folded less than three months after the FBI executed a search warrant at its offices seeking evidence of insider trading. After LG co-founder David Ganek learned that the warrant application incorrectly alleged that he knowingly received inside information from an LG analyst, he sued several government officials for damages, asserting violations of, among other things, his Fourth and Fifth Amendment rights. The U.S. Court of Appeals for the Second Circuit (Court) recently dismissed his causes of action, holding that the defendants are entitled to qualified immunity from suit and that misstatements in the search warrant did not violate Ganek’s constitutional rights. The Court’s finding should serve as an important warning that, even if the government commits missteps in its pursuit of insider trading and other violations, targeted fund managers may not have recourse to reverse or mitigate the damage done by those actions. This article analyzes the Court’s order, along with the facts and circumstances leading up to it. For a summary of Ganek’s complaint,
see “Former Level Global Head David Ganek Sues U.S. Attorney Bharara and Other Senior DOJ and FBI Personnel, Claiming Fabrication of Evidence Against Him
” (Mar. 12, 2015).