BOSTON (Reuters) – The tight-knit Boston hedge fund community has been rattled by a guilty plea in the biggest insider trading prosecution in two decades.
Loch Capital Management, a technology-oriented hedge fund that once boasted over $2 billion (1.2 billion pounds) in assets, has been hit hard by redemptions because of close personal ties between its founders — twin brothers Timothy and Todd McSweeney — and a key witness in the still-unfolding Galleon investigation.
The reason? Federal prosecutors revealed that Steven Fortuna, a co-founder of hedge fund S2 Capital Management, had pleaded guilty in the ongoing insider trading investigation and was cooperating with federal authorities, said at least three people familiar with Loch Capital.
Neither McSweeney has been implicated by name in any court filing that federal prosecutors or securities regulators have made public about the investigation.
Still, speculation has swirled around their firm as a result of the brothers’ friendship with Fortuna, which prompted a string of clients to demand their money from the fund.
