(Reuters) – A Manhattan federal judge has ordered an insurer to keep advancing legal fees of a hedge fund implicated in a criminal insider trading probe, saying the insurer was not excused because a fund analyst knew there might be a fraud when the policy was taken out.
Wednesday's decision by U.S. District Judge Paul Engelmayer is a defeat for XL Specialty Insurance Co, which had sought to rescind its $10 million policy for Level Global Investors LP and recoup more than $7.3 million already advanced, including to co-founder Anthony Chiasson.
Lawyers involved with the hedge fund industry have said a ruling favoring XL could have forced hedge funds to review their insurance policies. Level Global had claimed it would cause irreparable harm.
The case stemmed from a secret April 2011 guilty plea by former Level Global analyst Spyridon Adondakis, who unbeknownst to XL and Level Global admitted to fraud over activities that predated the policy and had begun cooperating with prosecutors.
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