George Canellos, Director of the SEC’s New York Regional Office

Diamondback Capital agrees to settle SEC insider trading charges

Diamondback Capital Management LLC has agreed to pay more than USD9 million to settle insider-trading charges brought by the SEC on 18 January. The proposed settlement is subject to the approval of Judge Paul G Gardephe of the US District Court for the Southern District of New York.

As part of the proposed settlement, the Stamford, Connecticut-based hedge fund adviser also has submitted a statement of facts to the SEC and federal prosecutors, and entered into a non-prosecution agreement with the US Attorney’s Office for the Southern District of New York.

Under the proposed settlement, Diamondback will give up more than USD6 million of allegedly ill-gotten gains and pay a USD3 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.

“We are pleased to have reached a prompt resolution of the charges against Diamondback,” says George S Canellos (pictured), Director of the SEC’s New York Regional Office. “If approved by the court, we believe that the proposed settlement appropriately sanctions the misconduct while giving due credit to Diamondback for its substantial assistance in the government’s investigation and the pending actions against former employees and their co-defendants.”

Last week, the SEC filed insider-trading charges against Diamondback, a second hedge fund advisory firm, and seven individuals, including a former Diamondback analyst and former Diamondback portfolio manager. In reaching the proposed settlement announced today, the SEC considered the substantial cooperation that Diamondback provided, including conducting extensive interviews of staff, reviewing voluminous communications, analysing complex trading patterns to determine suspicious trading activity, and presenting the results of its internal investigation to federal investigators.

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