A federal court in New York City refused to dismiss a lawsuit against Preet Bharara, the US Attorney for the Southern District of NY, and various FBI agents and employees of the US Attorney’s Office alleging violations of certain constitutional rights of David Ganek, a former hedge fund operator. Mr. Ganek filed a lawsuit against the defendants in February 2015, after he shut down his hedge fund, Level Global Investors, following a highly publicized raid by FBI agents on Level Global’s offices in November 2010. The raid was part of the US Attorney’s Office investigation of possible insider trading by financial professionals. In his complaint, Mr. Ganek alleged that an affidavit presented to a magistrate to authorize the raid “contained deliberate misrepresentations that were later exposed by sworn trial testimony of an FBI agent and a government informant.” Specifically, Mr. Ganek alleged that defendants stated in the affidavit that a former Level Global employee, Sam Adondakis, obtained inside information from third-party consultants and provided it to Mr. Ganek. However, claimed Mr. Ganek, defendants had no basis for the statement that, in fact, constituted a fabrication. Even after Mr. Bharara and other supervisory defendants learned of contrary facts stated in the affidavit, they did not advise the magistrate to correct the record, alleged Mr. Ganek. Saying that Mr. Ganek’s complaint contained “grave allegations,” the Hon. William Pauley III ruled mostly against defendants’ motion to dismiss and permitted Mr. Ganek’s lawsuit, which also alleged violations of his civil rights, to proceed.
My View: Sadly, the decision in this matter reads like an episode of Billions, the Showtime series based on the relentless and highly personal efforts of a fictional US Attorney to indict an equally make-believe hedge fund operator for insider trading. However, there can be no amusement in real life when activities of law enforcement personnel result in the demise of a real business and the suffering by real persons. This is particularly the case, as alleged by Mr. Ganek, where the warrant that authorized the highly publicized raid on the premises of his hedge fund that led to its demise may have been based on knowingly false information provided by government employees. Mr. Ganek’s claims are indeed, as the judge hearing this matter stated, “grave allegations.” (Click here to access my review of Billions in the article, “Billions: Ambiguity in Control” in the January 18, 2016 edition of Bridging the Week.)