FBI raids seeking documents from three investment firms are related to hedge fund insider-trading investigations directed by the office of Manhattan U.S. Attorney Preet Bharara, according to a person familiar with the probes.
The offices of Level Global Investors and Diamondback Capital Management, firms founded by alumni of SAC Capital Advisors, were searched by FBI agents, the government said Monday. Agents also executed a search warrant at the offices of Loch Capital Management, according to another person familiar with the matter.
Both sources declined to be identified because the investigations are ongoing.
“The government has decided it needs to use force to obtain all the information,” said Jacob Frenkel, a former federal prosecutor and lawyer with the Securities and Exchange Commission. “It has opted not to issue grand jury subpoenas but instead use the search-warrant process.”
Steve Bruce, a spokesman for Diamondback, and Andy Merrill, a spokesman for Level Global, confirmed the FBI had searched the firms’ offices and said they are cooperating. Timothy McSweeney of Loch Capital didn’t respond to a phone message seeking comment.
Ellen Davis, a spokeswoman for Mr. Bharara, declined to comment.
Diamondback owned U.S.-listed stocks in 706 companies at the end of the third quarter, with a market value of $4.13 billion, most of it in energy companies and financial services, according to data compiled by Bloomberg. Level Global owned stocks in 77 companies valued at $3.08 billion, with 34% in consumer discretionary stocks and 31% in information technology companies.
Level Global, founded in 2003 by SAC veteran David Ganek, told clients in April that it had sold a minority stake to a leveraged-buyout firm run by Goldman Sachs Group Inc., Petershill Fund Offshore.
Diamondback was started in 2005 by three former SAC traders, including Rich Schimel. Mr. Schimel is the brother-in-law of SAC’s founder, Steven A. Cohen.
Mr. Schimel didn’t return phone messages seeking comment. Andrea Raphael, a spokeswoman for Goldman Sachs, and Jonathan Gasthalter, a spokesman for SAC, declined to comment.