U.S. Says Level Global Founder’s Lawsuit Should Be Tossed

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Level Global Investors LP founder David Ganek’s claims that prosecutors and FBI agents illegally raided his hedge fund’s office based on fabricated evidence were called “preposterous” by government lawyers seeking to dismiss his lawsuit.

Ganek sued in February, saying his hedge fund had been searched in 2010 based on fabricated evidence. He accused officials including Manhattan U.S. Attorney Preet Bharara of being involved in a wide ranging conspiracy during an insider trading probe. Ganek blames the government for “destroying” his fund, which closed a year after the raid.

The U.S. fired back on Friday, saying the search was properly conducted. It said there was sufficient reason by investigators to believe insider trading was going on at the fund after Sam Adondakis, a former Level Global analyst, agreed to secretly cooperate with the government a month before the searches.

“Ganek’s claim of ‘fabrication’ is implausible,” Daniel Stein, acting Manhattan U.S. Attorney for the case, said in a federal court filing. The suit is “based on a far-fetched and wholly implausible theory that rests entirely on a misreading of one non-essential statement” in the government’s search warrant, the U.S. said.

The U.S. argued in the filing that federal agents and prosecutors are immune from such suits and that Ganek is “seeking to hold them personally liable for hundreds of millions of dollars for simply doing their jobs.”

Davidson Goldin, a spokesman for Ganek, didn’t comment on the filing when contacted outside regular business hours.

Suit’s Timing

Ganek waited too long to file his suit, Stein said, saying the deadline for filing such a case would have been November


In his complaint, Ganek said he wasn’t allowed to see the sealed search warrant used for the raid until March 2012.

Ganek wasn’t charged by prosecutors or sued by the U.S. Securities and Exchange Commission.

Adondakis “made clear” while testifying in the 2012 trial of Level Global co-founder Anthony Chiasson that he never told Ganek the information he was getting about Dell Inc. came from company insiders, Ganek said in his complaint. Information in the search warrant that Ganek said contradicts that account was the result of government fabrication, according to the complaint.

He also alleges the government violated his rights against unreasonable search and to due process of law. He seeks unspecified damages.

FBI Wiretaps

The government contends that by the time Level Global was searched, federal investigators had collected a substantial amount of evidence to legally support the raid. The FBI had wiretapped conversations that suggested Adondakis had received inside information, prosecutors said in Friday’s filing. Adondakis, who agreed to cooperate with the U.S. in October 2010, also provided information about Level Global, the U.S. said.

In the filing, Stein cited an FBI agent’s affidavit summarizing an interview with the analyst that stated, “Adondakis spoke with and provided inside information to David Ganek, Chiasson and another Level Global employee and informed Ganek, Chiasson and the other Level Global employee regarding the sources of the inside information.”

Ganek hasn’t shown that statement is false, Stein said in the filing. The government was investigating trades that involved several companies other than Dell, the U.S. said.

Chiasson’s 2012 conviction for insider trading was overturned by a federal appeals court in December. U.S. Solicitor General Donald Verrilli is asking the Supreme Court to review that decision.

The case is Ganek v. Leibowitz, 15-cv-01446, U.S. District Court, Southern District of New York (Manhattan).