Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Monday, January 23, 2012

Diamondback Settles Insider Trading Charges; SEC Cites Its Cooperation

The SEC announced that Diamondback Capital Management LLC has agreed to pay more than $9 million to settle insider-trading charges brought by the Commission on Jan. 18. The SEC said it considered the substantial cooperation that Diamondback provided, including conducting extensive interviews of staff, reviewing voluminous communications, analyzing complex trading patterns to determine suspicious trading activity, and presenting the results of its internal investigation to federal investigators. As part of the proposed settlement, the hedge fund adviser also has entered into a non-prosecution agreement with the U.S. Attorney’s Office for the Southern District of New York.

Under the proposed settlement, Diamondback will give up more than $6 million of allegedly ill-gotten gains and pay a $3 million civil penalty. In addition, Diamondback consented to a judgment that permanently enjoins it from future violations of federal anti-fraud laws. The proposed settlement would resolve charges of insider trading by Diamondback in shares of Dell Inc. and Nvidia Corp. in 2008 and 2009.

The SEC also filed charges against a second hedge fund advisory firm and seven individuals, including a former Diamondback analyst and former Diamondback portfolio manager.

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