FBI raids 3 hedge funds in an ongoing insider trading investigation by Zuzana Zelenakova

Suspicions of pervasive insider trading were the reason behind the recent FBI raids on hedge funds on Wall Street. The raids of three hedge funds including Diamond Capital Management LLC, Level Global Investors LP (both Connecticut funds run by former managers of Steve Cohen´s SAC Capital Advisors) and Boston-based Loch Capital Management gave an impression that federal investigator were worried the evidence could be destroyed. Another purpose was to send out a warning that there is a serious prosecution going on. "I think there is a desire to send a message to people who are not currently the target of criminal investigations that there is a cost to engaging in this ! type of potentially criminal behavior," said Ross Gaffney, once a FBI agent now working for consulting firm Gaffney Gallagher Phillip. Most experts agree on the fact that the main point of the search warrants was to simply scare people. Series of new insider trading cases is expected to be unveiled most probably by the end of the year. Definitely, the federal action sent shivers running through hedge funds. It has been just more than a year since the biggest probe of insider trading at hedge funds in the United States when Galleon hedge fund was charged with conspiracy and security fraud. 23 company executives were charged back then including the hedge fund´s founder Raj Rajaratnam. Now back to the new investigation that could take weeks or months even. "This is not standard operating procedure in a white-collar case," said Ellen Zimiles, a former federal prosecutor who heads global investigations and compliance at Navigant Consulting. "The fact that three entities we! re searched at the same time could mean investigators believe ! there is a connection, or this is a larger investigation. This is a very clear warning shot."

related story (sgx18649): http://news.yahoo.com/s/ap/us_insider_trading_hedge_funds;_y...

by Zuzana Zelenakova for Cantell TV (http://cantell.tv)

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