United States: Former Hedge Fund Manager's Civil Rights Suit Against New York U.S. Attorney Permitted To Proceed Into Discovery

Shortly into his tenure as United States Attorney for the Southern District of New York, Preet Bharara announced a crackdown on insider trading, indicating that it would be his office's "top criminal priority" and that investigations would utilize novel and "covert methods" to achieve convictions, including using wiretaps and informants. According to Bharara, "every legitimate tool should be at our disposal." Over the next several years, federal prosecutors in Manhattan initiated nearly 100 insider trading cases against some of Wall Street's leading names, and secured more than 80 convictions, many through guilty pleas. For his work, Time magazine featured Bharara on its February 13, 2012 cover under the headline: "This Man is Busting Wall Street."

Bharara's crusade against insider trading received a serious blow, however, in December 2014, when the Second Circuit vacated the convictions of two hedge fund managers in U.S. v. Newman, No. 13-1837, 2014 WL 6911278 (2d Cir. Dec. 10, 2014), finding that prosecutors had not shown that defendants knew that the corporate insider disclosed information in exchange for "personal benefit" (for more detail on Newman, see here). As chronicled in depth in this space (see here, here, here, here, and here), Newman caused significant fallout—insider trading charges were dropped and additional convictions were vacated.

On March 10, 2016, Bharara and his team suffered another setback: a federal judge permitted a civil rights case filed by one of Bharara's former insider trading targets, hedge fund manager David Ganek, to proceed into discovery.

By way of background, Ganek's hedge fund, Level Global Investors ("LGI"), was raided by the FBI in November 2010 in connection with alleged insider trading. The search warrant permitted agents to search LGI's offices and seize Ganek's personal files and mobile phone. The raid was highly publicized; having been notified in advance, the Wall Street Journal was on hand and published photographs from the raid. This development apparently caused justifiable concern among LGI's investors and several weeks later, Ganek's lawyer allegedly informed Bharara that LGI would be forced to close unless Bharara publicly clarified that Ganek was not the target of an insider trading investigation. Bharara made no such clarification, and LGI closed in February 2011. No charges were ever brought against Ganek.

In February 2015, Ganek initiated a suit against Bharara, six of his subordinates at the U.S. attorney's office, and numerous FBI personnel, alleging that the defendants' roles in the LGI investigation leading to LGI's shuttering violated Ganek's constitutional rights. Central to this case was the affidavit used by investigators to obtain the search warrant, which was signed by a former LGI research analyst named Sam Adondakis. The affidavit, which was finally provided to Ganek in 2012, asserted that Adondakis had: (1) "obtained Inside Information from insiders at public companies"; (2) "provided this Inside Information" to Ganek, who executed trades thereon; and most importantly (3) "informed [Ganek] regarding the sources of the Inside Information." Ganek alleges that Adondakis actually told the FBI that he never informed Ganek about his inside sources, and thus the affidavit was fabricated in substantial part. Indeed, both Adondakis and the FBI agent who took his initial proffer testified at the Newman trial that Adondakis never stated that he informed Ganek regarding his inside source. Accordingly, Ganek claims that several of the defendants fabricated inculpatory evidence against Ganek and used that evidence to obtain a search warrant in violation of his Fourth and Fifth Amendment rights. The complaint also alleges that additional defendants (including Bharara) failed to intervene to prevent the allegedly unlawful search or prevent further harm to Ganek's reputation and business prospects.

Defendants moved to dismiss Ganek's claims on the ground (among others) that the doctrine of qualified immunity barred the suit. But earlier this month Judge William H. Pauley denied (in large part) defendants' motion in Ganek v. Leibowitz, No. 15-cv-1446, 2016 WL 929227 (S.D.N.Y. Mar. 10, 2016).

Indeed, the Court found that Ganek "adequately pled" that the affidavit in question "contained materially false statements and omissions" and that the misrepresentation was material, i.e., relevant to the magistrate's determination of whether to authorize the search of Ganek's files, computers and phones. Thus, Ganek's complaint adequately stated a claim for a violation of the Fourth Amendment's probable cause requirement. In connection with Ganek's Fifth Amendment procedural due process claim—which includes the right "not to be deprived of liberty as a result of the fabrication of evidence by a government officer"—the Court found Ganek sufficiently pled an "injurious false statement" and that the seizure of his personal items was premised on that statement. Finally, regarding Ganek's claim that Bharara and others violated their affirmative duty "to protect the constitutional rights of citizens from infringement by other law enforcement officers"—the "failure to intervene" claim—the Court noted Bharara's refusal to clarify that Ganek was not the target of the investigation, even after learning that the affidavit misrepresented Adondakis' proffer. On this point, the Court observed that "government attorneys are ethically obligated to limit the collateral damage resulting from government investigations" and thus found that Ganek's claim was sufficiently pled. Judge Pauley also dismissed three of Ganek's other claims, including one premised on vicarious liability.

The Ganek case presents a relatively rare instance of a plaintiff's claims prevailing over the defense of qualified immunity. As a result, the case will proceed into discovery in which Ganek will seek documents and testimony to determine, as Judge Pauley stated, "whether this case is about a simple misunderstanding or whether something more troubling was afoot."

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
26 Sep 2018, Seminar, Tokyo, Japan

Orrick’s Global Japan Practice is hosting a series of “Orrick Library” seminars to explore legal issues in various fields in Japan as well as the United States, Asia and Europe

26 Sep 2018, Conference, New York, United States

Employment Partner, Mandy Perry and Chair of Orrick's Global Employment Law Practice, Mike Delikat will be participating in the Global Business Protections 2018: International Restrictive Covenants and Confidential Information Conference.

10 Oct 2018, Conference, Florida, United States
Julie Totten is Program Chair of this year’s conference, Lynne Hermle is speaking on women in the courtroom, boardroom, and c-suite, and Erin Connell is speaking on pay equity and pay transparency.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions