In a complaint unsealed yesterday, David Ganek, the former head of hedge fund Level Global, accuses U.S. Attorney Preet Bharara and various other government officials of fabricating evidence that led to an office raid and, ultimately, to the collapse of Level Global. The complaint begins:
This is a case about the government fabricating evidence and, as a result, destroying a business. Knowing the “catastrophic risk” that a business organization would foreseeably suffer from publicity relating to a criminal investigation, in November 2010, Defendants from the FBI and the U.S. Attorney’s Office for the Southern District of New York authorized a high-profile raid against Plaintiff David Ganek at the offices of his hedge fund, Level Global Investors. Defendants had no probable cause to believe Mr. Ganek had engaged in any wrongdoing. He was never charged by the Department of Justice or even by the Securities and Exchange Commission. The alleged evidence used to justify the raid against Mr. Ganek was fabricated. Specifically, a number of FBI agents and individual AUSAs met with a witness who told them he did not have knowledge that Mr. Ganek had been involved in insider trading; the investigators then falsely represented that the witness had said just the opposite—-that he did have such knowledge. This fabrication was the basis for the raid on Mr. Ganek’s office. The wrongful search was also widely and recklessly publicized. Due to a tip to the Wall Street Journal, the raid was front page news. Coverage included photographs of agents carrying boxes of files from the Level Global offices. Because of the raid, Mr. Ganek faced the foreseeable consequence that his investors — themselves highly sophisticated financial professionals — would withdraw their investments from his fund, which would cause it to fold.