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FBI Raids Hedge Funds Level Global and Diamondback in Insider-Trading Probe

by Zachary A. Goldfarb

Federal investigators raided the offices of several hedge funds Monday morning, a federal law enforcement official said, advancing a broad investigation into insider-trading.

FBI agents searched the offices of Level Global Investors and Diamondback Capital Management, two hedge funds that manage billions of dollars in assets.

"The FBI is executing court-authorized search warrants in an ongoing investigation. This matter is sealed, and we have no additional comment," said Richard Kolko, an FBI spokesman.

Andy Merrill, a spokesman for Level Global, based Greenwich, Conn., said that the FBI visited the company Monday morning "as part of what we believe to be a broader investigation of the financial services industry."

A spokesman for Diamondback Capital, based in Stamford, Conn., could not be immediately reached for comment.

The raids come as federal prosecutors in New York are in the advanced stages of an extensive insider-trading probe that could lead to criminal charges against Wall Street traders and executives, according to law enforcement officials.

Authorities had planned to file charges in the investigation by year's end but are now considering moving up the timetable after details of the probe came out in a article in the Wall Street Journal on Saturday.

Preet Bharara, U.S. attorney for the Southern District of New York, has led the charge on insider-trading investigations, calling the crime a "top criminal priority" and warning of "rampant" insider trading.

According to published reports, SAC Capital Advisors, one of the biggest names in the hedge fund world, run by hedge fund master Steve Cohen, is being examined by investigators. Both Level Global and Diamondback were founded by SAC alumni.

A spokesman for SAC did not immediately reply to a request for comment.

Diamond owns stock in 706 companies - mostly energy and financial services concerns - with a value of $4.13 billion, according to Bloomberg News. Level Global owns stocks in 77 companies worth $3.08 billion, according to Bloomberg.

The federal investigation, conducted by the U.S. attorney's office in Manhattan and the FBI, has been underway for several years and extends far beyond Wall Street to financial offices across the country.

The Securities and Exchange Commission is conducting a parallel civil probe.

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