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

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.

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.