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Schimel’s Diamondback Capital Will Not Face Criminal Charges

Diamondback Capital Management, one of the largest hedge funds ensnared by the government’s insider trading crackdown, will not face criminal charges” reports the New York Times. Instead, it “will pay more than $9 million in fines and penalties to resolve its role in the investigation.”

Diamondback was able to enter into a non prosecution agreement with the US Attorney’s office. “The government agreed not to bring criminal charges against Diamondback, citing the fund’s prompt cooperation and voluntary adoption of remedial measures.” Under the terms of its agreement with the SEC and the federal government, Diamondback “will forfeit $6 million in ill-gotten gains and pay a civil penalty of $3 million.” George Canellos, head of the SEC’s New York Office, said of the pact: “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.”

Diamondback’s pact does not include any admission that the fund “neither admits nor denies” wrongdoing. This is a departure from the SEC’s historical practices. “This month, the S.E.C. announced that it would no longer permit defendants to ‘neither admit nor deny’ charges if the defendant admitted to or had been convicted of criminal violations,” reports the New York Times. “The new policy also applies to cases like the Diamondback one in which a company enters a nonprosecution agreement with criminal authorities.”

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