Level Global Will Pick Up The Tab On Insider Trading Investigation Legal Fees

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Hilarious as it would be to stick investors with the bill, that's not the kind of hedge fund we're dealing with here.

Re: Level Global Investors, L.T.D.

Dear Investors:

Understandably, many of you have inquired into the legal costs and expenses we are incurring as a result of the U.S. Attorney’s Office investigation into the subpoena. As we have informed you in the past, we are cooperating completely with that investigation and, to that end, we have engaged experienced external legal counsel to oversee our response to, and in cooperation with, the Government’s inquiry.

As many of you know, the Investment Manager and the Level Funds have professional liability insurance which we expect will cover our legal costs and expenses. We have put our underwriters on notice and we are working with them. The Investment Manager will pay, in full, the Policy’s deductible. In the event the Investment Manager incurs other related expenses, it will absorb them in full.

Please let us know if you have any questions and thank you for your continued support.

Sincerely,

Level Global Investors, L.P.

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After The STOCK Act It Will Still Be Legal To Trade On Congressional Inside Information*

Here's a sort of touching monologue from David Einhorn's call with Punch: If you’ve done the analysis, and come to the conclusion that on it’s own, the company is not going to make it, it makes all of the sense in the world to raise equity at whatever the price is, so that you can know that the company, you know, is – is going to make it. Now, what that brings to my mind though is, you know, obviously we haven’t done your analysis, we haven’t done -- signed an NDA; I don’t know that we’re going to sign an NDA, because we prefer to just remain investors, but from my perspective, and I’ll be just straight up with you, is that gives a lot of signalling value. And the signalling value that comes from figuring out the company has figured out that it’s not going to make it on it’s own is that we’ve just grossly misassessed the -- you know what’s going on here. And -- and that, that will cause us to have to just reconsider what we’re doing, which is not the end of the world to you. You will continue on even if we don’t continue on with you. You could sort of see why the FSA read that to mean that he was insider trading. Like ... (1) You have told me something with signalling value. Sorry - "a lot of signalling value." (2) I will now act on that signal. (3) Don't be mad. "Signalling value" sure sounds like it means "material nonpublic information," doesn't it? Now as we've discussed before, trading on that information would not be enough to make Einhorn guilty of insider trading in the US, though maybe it wouldn't be exactly a great idea here either. Why? Because in our weird but sort of sensible insider trading laws, it's just not illegal to trade on material nonpublic information. It's only illegal to trade based on material nonpublic information that was obtained in violation of some sort of duty of confidence. Since Einhorn didn't sign an NDA, he had no duty of confidence. And since the Punch CEO and bankers weren't tipping him for nefarious purposes, but were instead sounding him out on the company's behalf as a shareholder and potential investor in a new capital raise, they weren't breaching their duty of confidence. You could quibble with the details of that but it's basically the law here. In England not so much. That also seems to be the law for our friends in Congress, who recently passed a law making it illegal for them to insider trade, which is worrying some people who make their living from trading on Congressional inside information: