By Matthew Goldstein
The news that federal investigators had been gathering evidence of potentially improper trading against one of the founders of Loch Capital Management since early 2009 should make some hedge fund managers nervous–especially ones whose funds were big users of expert network firms like Primary Global Research.
Ever since the FBI raided three hedge funds last November, people in the hedge industry have been grumbling that the high-profile raids–which ultimately forced Loch and Level Global Investors to shut down–may have been an indication that U.S. authorities rushed to judgment. That’s especially since no one at Loch, Level Global or Diamondback Capital has been charged with any improper trading based on stock tips gleaned from a consultant with an expert network firm.
As I reported, a court filing shows that some 18 months before the FBI raided Loch, Diamondback and Level Global, authorities already had some evidence from an informant that Loch co-founder Todd McSweeney may have gotten “inside information” from Primary Global information. So far, neither McSweeney nor his twin brother Tim, the fund’s other co-founder, has been charged with any wrongdoing.