February 26, 2015 / 11:27 PM / 4 years ago

Ex-hedge fund manager sues U.S. officials over insider trading raid

NEW YORK (Reuters) - A former hedge fund manager on Thursday sued U.S. law enforcement officials, including Manhattan U.S. Attorney Preet Bharara, claiming the government improperly raided his offices and destroyed his business as part of a widespread insider trading crackdown.

David Ganek, former head of Level Global Investors, said in the lawsuit that prosecutors from Bharara’s office “fabricated” evidence to justify the raid in November 2010.

“Defendants had no probable cause to believe Mr. Ganek had engaged in any wrongdoing,” the lawsuit said.

The complaint does not seek a specific amount of damages but said that eight months before the raid, Level Global was valued at $400 million.

A spokesman for Bharara declined to comment.

Ganek’s partner, Anthony Chiasson, was charged with insider trading and eventually convicted at trial alongside former Diamondback Capital Management portfolio manager Todd Newman in 2012. Ganek was never charged.

The case against Chiasson and Newman came amid a string of insider trading prosecutions by Bharara’s office, which has charged 92 individuals since October 2009.

In December, however, Newman and Chiasson’s convictions were overturned by a federal appeals court, which raised the bar for insider trading prosecutions.

That decision has led to the dismissal of insider trading charges against five other individuals and prompted other defendants to ask judges to throw out similar charges.

Ganek’s lawsuit was filed in Manhattan federal court on the same day that a copy of the warrant that led to the raid was unsealed, after a U.S. judge granted a request from The New York Times.

The warrant, which was partially redacted, stated that former Level Global analyst Spyridon Adondakis told FBI investigators he had passed illegal tips to Ganek, Chiasson and an unnamed individual, who then traded on that information.

Ganek’s lawsuit, however, claims the warrant was false.

“Specifically, a number of FBI agents and individual AUSAS met with a witness who told them he did not have knowledge that Mr. Ganek had been involved in insider trading; the investigators then falsely represented that the witness had said just the opposite,” the lawsuit said.

The lawsuit also said that Adondakis, who pleaded guilty and appeared as a government witness at Chiasson’s trial, testified that he had never told Ganek about the source of any inside information.

The lawsuit contends that the raid, and ensuing media coverage, ensured Level Global’s demise.

Reporting by Joseph Ax; Editing by David Gregorio

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