Over the 2010 raid of Level Global.
AB Wire
WASHINGTON, DC: US Attorney Preet Bharara, some members of his staff and some FBI agents have been sued by hedge fund mogul David Ganek, over the 2010 raid of his $4 billion hedge fund, Level Global, co-founded with Anthony Chiasson, which later shut down.
The lawsuit, filed in Manhattan federal court, accuses Bharara, the prosecutors and the FBI agents of “prosecutorial misconduct” in conducting the raid, which took place at the height of the government’s widespread crackdown on insider trading, reported USA Today.
The government “fabricated information” to gain court approval to conduct the search, which resulted in the firm’s closing its doors several months later, the lawsuit said.
Ganek said the search was “based on a fabricated claim” that a former-analyst-turned-government informant told FBI agents and prosecutors that Ganek knew about alleged insider trading at Level Global, reported Today.
In reality, the informant, Sam Adondakis, had told the agents and prosecutors that Ganek had no knowledge of the alleged insider trading, Ganek’s lawsuit said, citing trial testimony that followed the raids.
Level Global was forced to shutter by February 2011, several months after the raid.
“The government’s reckless search of Level Global needlessly damaged my reputation and the reputations of dozens of other good, honest people,” Ganek said in announcing the lawsuit.
Chiasson was arrested two years after the raid, and later convicted of insider trading. But Chiasson’s conviction was recently overturned by a New York federal appeals court, which ruled that there was a lack of evidence that his trades fell within the legal definition of insider trading. It was one of the rare setbacks for Bharara, in his career.
Ganek and Chiasson were once star traders at SAC Capital, the former hedge fund founded by the billionaire investor Steven A. Cohen, and long a focal point of the government’s investigation, reported The New York Times. Although SAC ultimately pleaded guilty to insider trading, the government never raided its offices, highlighting the rarity of such an aggressive move.
The New York Times reported that while legal experts said Ganek’s lawsuit could be a long shot, it comes at a time when Bharara’s image as an invincible prosecutor — racking up convictions on Wall Street and setting his sights on Albany’s power brokers — is beginning to fray.
The Times said, “Bharara’s crackdown on Wall Street, for one, is facing judicial challenges. Recently, a federal appeals court ruling overturned the convictions of two hedge fund traders, including Anthony Chiasson, Mr. Ganek’s partner at Level Global. And Sheldon Silver, the state assembly speaker whom Mr. Bharara recently indicted, has complained that the prosecutor’s office is fighting his case in the news media.”