Bloomberg News

U.S. Sues for $6 Milion Diamondback Previously Forfeited

August 07, 2012

U.S. prosecutors asked a judge for permission to recover $6 million that Diamondback Capital Management LLC forfeited as part of a January agreement in which the government agreed not to prosecute the hedge fund for insider trading.

The U.S. government filed a civil forfeiture complaint today in Manhattan federal court. Diamondback previously transferred $6 million to the U.S. Marshals Service as part of the non-prosecution agreement. Today’s complaint seeks to formalize the payment.

The $6 million “represents the total amount of illegal profits and losses avoided as a result of the trades that were based, or likely based, in whole or in part, on inside information,” the complaint said.

In January, Stamford, Connecticut-based Diamondback agreed to pay a $3 million fine and forfeit $6 million in a settlement with prosecutors and the U.S. Securities and Exchange Commission. Prosecutors agreed not to prosecute Diamondback for the actions of former employees. Today’s complaint doesn’t name Diamondback.

“The action is a simple formality to move funds previously paid to U.S. Marshall to the U.S. Treasury,” Steve Bruce, a Diamondback spokesman, said in an e-mailed statement. “There is nothing new here.”

The case is U.S. v. $6 million in currency, 12-cv-6023, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporters on this story: David Glovin in New York federal court at dglovin@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.


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