Appeals court tosses hedge fund owner’s claims against FBI

FAN Editor

A hedge fund owner’s bid to hold the government responsible for an FBI raid that he says ruined his business was lost Tuesday when a federal appeals court rejected his lawsuit.

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The 2nd U.S. Circuit Court of Appeals in Manhattan said David Ganek cannot hold federal agents and prosecutors liable for the November 2010 raid that preceded the closure three months later of his Greenwich, Connecticut-based business, Level Global Investors, which had over $4 billion in assets under management.

The appeals court said the possibility Ganek unwittingly traded on inside information cannot defeat probable cause to search his office.

Ganek in a 2015 lawsuit had sought unspecified damages for the loss of his business, which was valued at $400 million, and for lost income and lost business reputation. He said agents made misrepresentations before raiding his New York offices.

The defendants asked the court to toss the lawsuit, saying they were protected by immunity. A lower-court judge had allowed the lawsuit to proceed, noting that the raids of Ganek’s hedge fund and others “sent shockwaves through Wall Street” and led to the indictment of investment bankers and traders.

In its ruling, a three-judge 2nd Circuit panel said there was at least a fair probability to think that his office was a place where evidence of an insider trading scheme would be found.

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“In any event, this is not a case in which there was no evidence of Ganek’s involvement in insider trading,” the appeals court said of Ganek, who was not charged.

In a statement, Ganek said the appeals ruling does not preclude the Justice Department from bringing disciplinary charges against those defendants who still work in government.

“This is a dangerous day for private citizens and a great day for ambitious, attention-seeking prosecutors who are now being rewarded with total immunity even when they lie and leak,” he said.

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