Insider Trading Investigation Targets Three Hedge Funds

According to a November 29, 2010 Bloomberg article, U.S. banks might be facing $54 billion to $106 billion in costs as an increased number of investors demand that issuers of mortgage backed securities (MBS) repurchase faulty loans. Paul Miller with FBR Capital Markets had projected losses of $44 billion to $91 billion in September. He said the new numbers reflected recent disclosures about possible losses, which likely involves the recent news about the Coutrywide mortgage mess, which was revealed during deposition testimony in a New Jersey foreclosure case.

The major players involved in this include JP Morgan, Citigroup, Bank of America and Wells Fargo, who will likely account for 40% of the industry losses.

If you have suffered losses from investing in mortgage backed securities (MBS), contact our securities law firm for a confidential, no obligation consultation at 1-800-259-9010.

According to reports in the Wall Street Journal on November 22nd and November 23rd, FBI agents raided the offices of Diamondback Capital Management and Level Global Investors in Connecticut and seized documents. They are both run by former managers of Steve Cohen’s SAC Capital Advisors. A third firm, Loch Capital Management is based in Boston. Diamondback began in 2005 is based in Stamford, Connecticut and oversees more than $5 billion in assets. Level Global was started in 2003 and was managing roughly $4 billion in assets. Finally, Loch Capital had around $750 million in assets as of the beginning of the year.

The raids followed reports that authorities were preparing insider trading charges against the $1.7 trillion hedge fund industry. Charges could be filed before year end, which would follow those already filed against Raj Rajaratnam and his hedge fund, Galleon Group. Twenty three former hedge fund managers, lawyers and others have faced criminal or civil charges in what has been tagged the largest insider trading case in hedge fund history. There have been fourteen guilty pleas and eight not guilty, so far. The insider trading investigation is said to involve investment bankers, consultants and hedge fund traders.

Goldman Sachs shares have reacted negatively to the news, although the firm has not yet been implicated in the scandal. Time will tell if they are implicated.

Our securities law firm represents individual and institutional investors who have suffered significant stock market losses. Please contact us at 1-800-259-9010 for a confidential, no obligation consultation regarding your particular situation.

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