In the Courts

The lawsuit was filed in February of this year, and asserts claims against four FBI agents and two Assistant United States Attorneys, for violation of Ganek's Fourth and Fifth Amendment rights. Ganek also asserts claims against Preet Bharara and others for supervisory liability and failure to intercede. While damages in the case are unspecified, Ganek is seeking both compensatory and punitive damages.

In 2010, Ganek's now-defunct hedge fund, Level Global Investors, was under investigation for insider trading. Federal prosecutors and the FBI approached a former employee of Level Global, who agreed to cooperate with the investigation, and later admitted that he and other Level Global employees traded inside information. In its application for a search warrant, the government stated that Ganek was conscious of the insider trading sources, and in November 2010, the judge granted the warrant to search Ganek's personal office, financial records, correspondence, and phone records. Sworn trial testimony later revealed that the cooperating Level Global employee never told the government that he discussed the insider trading sources with Ganek.

Ganek asserts that the warrant should not have named him, as his involvement in the insider trading was unsubstantiated and based on false information provided by the government to the judge issuing the warrant. The defendants filed a Motion to Dismiss, granted in part and denied in part on March 10, 2016 by Judge Pauley. The Judge allowed Ganek's Fourth and Fifth Amendment claims, and the failure to intercede and supervisory liability claims, to proceed. He wrote as part of his 35-page decision: ” ' Ganek pleads that the Supervisor Defendants were kept abreast of developments, prioritized the prosecution of high level executives, and tipped off The Wall Street Journal. Moreover, the Complaint contains thorough allegations establishing the high priority placed by the Supervisor Defendants on the insider trading investigation. These allegations include specific facts establishing the plausibility of the Supervisor Defendants' involvement prior to the raid, including admissions by certain defendants that the raid's consequences 'had been carefully considered at the highest levels,' and DOJ policy indicating that any decision to tip off the press required supervisory approval. In short, given the high-profile nature of the investigation and involvement of the Supervisor Defendants, as alleged in great detail in the Complaint, it is plausible that some of the Supervisor Defendants would have learned the details of the November 2, 2010 Meeting [between former Level Global employee and investigators] and, at the very least, 'entertained serious doubts as to the truth of the [allegations] in the Affidavit.'” Judge Pauley did, however, dismiss Ganek's claim that the government tipping off The Wall Street Journal about the raid was itself a violation of Ganek's rights. Likewise, the Judge agreed with the defendants in their choice to proceed via a raid, as opposed to requesting the information in a subpoena.

In commenting on the matter, Acting U.S. Attorney for the case, Daniel Stein, stated that “Ganek's claim of 'fabrication' is implausible” and is “based on a far-fetched and wholly-implausible theory that rests entirely on a misreading of one non-essential statement.” In ruling on the Defendants' Motion to Dismiss, Judge Pauley noted that “[d]iscovery is now appropriate to ascertain whether this case is about a simple misunderstanding or whether something more troubling was afoot.”

In the Courts and Business Crimes Hotline were written by Mayer Brown Associate Colleen Snow.