Unstructured Finance

For one Level Global founder, the party is over

By Katya Wachtel

For the two founders of FBI-raided and since-shuttered hedge fund firm Level Global, life could not be more different.

In early January, one co-founder, David Ganek,  sat court-side at Madison Square Garden as the Charlotte Bobcats pummeled the New York Knicks. Ganek appeared relaxed and jovial as he greeted familiar faces in the front row. The Knicks lost, but Ganek could still enjoy the Knicks home-base party.

For Level Global’s other founder, Anthony Chiasson, life is not as sweet.

On Wednesday Chiasson (who launched Level Global with Ganek in 2003) was charged with insider trading as part of the FBI’s sweeping “Operation Perfect Hedge” investigation. Ganek has not been accused of any wrongdoing.

Chiasson and six others (including another former Level Global-ist, analyst Spyridon Adondakis) are accused of running a $62 million insider trading scheme in 2008 and 2009. He was released on $5 million bail on Wednesday, and has denied the charges against him.

Of all the defendants who are accused of lining their pockets with ill-gotten gains, the figure attached to Chiasson and Level Global is the largest: $57 million.

Steven Cohen in his own words

By Matthew Goldstein and Jennifer Ablan

The thing about deposition excerpts—even lengthy ones—is that some of the tantalizing material gets left on the cutting room floor. And that’s certainly the case with hedge fund billionaire Steve Cohen’s two-days worth of  testimony in the long-running Fairfax Financial litigation.

Now don’t get us wrong—there is plenty of great and illuminating stuff in the 242 pages of deposition testimony Reuters obtained through a court motion to unseal documents in the civil lawsuit. As we noted in our story, Cohen is pressed at great length for his views on insider trading—he thinks the laws are “vague”. And as we highlighted in our blog, there’s even an amusing little feud between the lawyers over how the SAC Capital founder should addressed.

Still, it makes you wonder what was said by Cohen in the more than 400 pages of deposition transcript that wasn’t unsealed. And we’d love to see Cohen on videotape as sometimes body language can be revealing.

Stevie Cohen Unplugged

By Jennifer Ablan

Steven A. Cohen, one of the world’s most successful and secretive billionaire hedge fund managers, shared some of his thinking on insider trading, something his worst critics have alleged SAC Capital knows a thing or two about.

Cohen in sworn deposition testimony earlier this year, an extended excerpt of which was obtained by my prolific colleague and partner-in-crime Matthew Goldstein, said: ”The way I understand the rules on trading on inside information, it’s very vague.”

Cohen added: “It’s my belief that the idea of material nonpublic informing could be interpreted differently, depending on which side of the transaction you’re on.” At one point, the 55-old-trader loses his cool a bit with Fairfax’s lawyer, Michael Bowe, commenting: “Well, you know, we’re having this conversation for about three hours about what’s material and whatnot. It’s pretty clear that you and I have a different view on it.” 

Steve Cohen’s forbidden transcript

By Matthew Goldstein

Hedge fund titan Steve Cohen is taking steps to appear more open these days.  Over the past year or so, he’s been showing up at industry conferences, charity events–even allowing himself to be photographed with his wife for a glossy spread in Vanity Fair magazine.

But there are some things the SAC Capital founder is drawing a line in the sand over when it comes to greater transparency, including some of his own words.

Cohen and his legal team are fighting hard to keep hours worth of deposition testimony that he recently gave in a civil lawsuit  under wraps. Last year, the billionaire trader sat for a deposition in the long-running stock manipulation lawsuit filed by Canadian insurer Fairfax Financial against SAC Capital and other hedge funds, including Dan Loeb’s Third Point and Jim Chanos’ Kynikos Associates.

Kinnucan v. Ainslie

By Matthew Goldstein and Svea Herbst-Bayliss

John Kinnucan, a research consultant who’s been linked to an ongoing insider trading probe, claims Maverick Capital founder Lee Ainslie has stiffed him by not paying all of the hedge fund’s bill from last year.

The Portland, Oregon-based Kinnucan tells Reuters/ Unstructured Finance that Maverick owes him $15,000 for research information he provided on technology companies in the second-half of 2010. The consultant says it was anger over Maverick’s outstanding tab that prompted him to send a brief and alarming email this week to Ainslie warning him that his $11 billion fund may “soon be charged with insider trading.”

Kinnucan, who concedes he has no inside scoop on what federal prosecutors are planning, says he was just having some fun at Ainslie’s expense because Maverick is the only one of his former customers that still owes him money. Kinnucan says Maverick won’t pay because the hedge fund contends he “caused a lot of disruption to their business.”

No comfort for hedgies

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.

Grassley the inquisitor

Sen. Chuck Grassley wants to know what the Securities and Exchange Commission did with complaints it received about potential improper trading by Steve Cohen’s SAC Capital.

But Grassley’s request that the SEC provide an official accounting for its actions seems a bit odd, given that securities regulators recently settled an insider trading case with former SAC Capital analyst Jonathan Hollander.

With federal prosecutors continuing to look into allegations of improper trading at Cohen’s fund, it’s hard to make the argument that SAC Capital hasn’t been investigated. Indeed, Reuters first reported in December 2009, that as far back as 2007 FBI agents have been looking into allegations of improper trading at SAC Capital.

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