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April 24, 2012 10:00 pm
David Ganek, a hedge fund manager and prominent art collector, participated in a phone call when colleagues allegedly discussed Dell’s confidential earnings, according to people familiar with a US insider trading investigation.
The call was described in the government’s criminal complaint alleging insider trading by Anthony Chiasson, who co-founded Level Global with Mr Ganek in 2003 after both men left SAC Capital, the $14bn hedge fund run by Steven Cohen.
The unnamed Level Global employees identified in the complaint as “Individual 2” and “Individual 4” are Greg Brenner, a technology analyst with Level Global, and Mr Ganek, people familiar with the matter say.
Neither Mr Ganek nor Mr Brenner has been accused of any wrongdoing. A lawyer for Mr Ganek declined to comment. Neither Mr Brenner nor his attorney could be reached.
Mr Chiasson was charged in January along with six others in an alleged insider trading scheme said to have netted $62m in illicit profits. Prosecutors allege the group, which included Spyridon Adondakis, a Level Global analyst, shared Dell’s confidential earnings data in advance of its release.
Mr Chiasson has denied any wrongdoing and is set to fight the allegations. Mr Adondakis has pleaded guilty and is co-operating with the government.
According to the criminal complaint, Mr Adondakis said he was on a phone call on August 27, 2008, the day before Dell was scheduled to announce earnings, with Mr Chiasson and two unidentified Level Global employees. The complaint alleges on that call Mr Adondakis “discussed the gross margin information that Adondakis had received from [Jesse] Tortora and the market expectations as to Dell’s gross margins”.
Mr Adondakis learnt the tip from Mr Tortora, an analyst with the Diamondback hedge fund who pleaded guilty and is co-operating with the government. Mr Tortora in turn received the information from a former colleague with an inside source at Dell.
After the telephone call, Level Global, which had already bet that Dell’s stock would drop, sold short an additional 250,000 shares, according to the complaint. Prosecutors allege Level Global made $53m in profits based on the inside information. Others allegedly made $9m in profits.
Mr Ganek and his wife Danielle, a novelist and former magazine editor, are well known in the Manhattan social scene as collectors of contemporary art, a hobby he shares with Mr Cohen.
Mr Ganek and Mr Chiasson left SAC and in 2003 launched Level Global, which they built into a business with $4bn in assets under management. The firm closed its doors following a November 2010 raid by agents from the Federal Bureau of Investigation who were looking into allegations of insider trading.
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