Level Global's Ganek Fights to Keep Suit Alive Against U.S.

  • Fund executive says U.S. fabricated evidence to raid firm
  • U.S. seeks total dismissal after partial win in trial court

Hedge-fund executive David Ganek battled to keep his lawsuit against U.S. prosecutors alive Friday, arguing in New York federal appeals court that authorities improperly raided his firm, Level Global Investors LP, based on falsified information.

Ganek, the co-founder of Level Global, sued former Manhattan U.S. Attorney Preet Bharara and 15 of his deputies in 2015, arguing authorities destroyed the $4 billion firm with fabricated evidence to justify their 2010 raid. Two Level Global traders were convicted of insider trading, but the decisions were later overturned, and the U.S. Securities and Exchange Commission returned a $21.5 million fine paid by the firm. Level Global folded in 2011.

The Manhattan U.S. attorney’s office won a partial dismissal of the case last year and filed an appeal to get the entire lawsuit thrown out.

Ganek said after the hearing that he was happy to finally make his case to the appellate court. “Today was an airing of the issues that I think are incredibly important," he said.

The case has attracted intense attention from current and former federal prosecutors, who filled the courtroom and spilled out onto temporary seating in the foyer. Seated among those in the overflow was acting U.S. Attorney Joon Kim, who has taken over the office following Bharara’s firing by President Trump earlier this month.

Insider Information

The FBI affidavit justifying the raid on Level Global contained an assertion that a witness, a Level Global analyst named Sam Adondakis, told agents he had informed Ganek of the source of insider information for trading tips. But Adondakis denied that assertion in trial testimony.

Judges on the panel appeared skeptical of some claims -- particularly that supervisors in the U.S. Attorney’s Office could be held liable for the alleged falsehood in the affidavit.

"They would have had to be told there was going to be a lie in the affidavit," U.S. Circuit Court Judge Reena Raggi said.

A lawyer for the U.S. argued Friday that the affidavit didn’t contain false information and maintained agents had probable cause to carry out the raid.

But a lawyer for Ganek, Nancy Gertner, insisted the information was false and that authorities needed to be held responsible.

"The notion there is no remedy for an officer of the United States to lie in an affidavit is extraordinary," she told the court. "This is about accountability."

The case is Ganek v. Leibowitz, 16-1463, U.S. 2nd Circuit Court of Appeals.

(Adds judge’s reaction to case in paragraphs seven and eight.)
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