Insider probe US hedge fund pays out $9 million

A US hedge fund caught in a major insider trading probe agreed Monday to pay the government $9 million and help prosecutors gather evidence on two of its employees in return for not being subject to prosecution. Diamondback Capital Management agreed to the deal just days after authorities announced they had arrested four finance workers in the probe and that three others had already entered guilty pleas. Diamondback agreed to pay $6 million and entered a non-prosecution agreement with the US attorney's office "in which the office agrees not to criminally prosecute Diamondback," Manhattan US Attorney Preet Bharara's office said in a statement. A further $3 million will be paid in a civil penalty to the Securities and Exchange Commission. In addition, the hedge fund must cooperate with prosecutors investigating two of its employees over trades they made in 2008. The forfeiture sum represents the amount of estimated profits for the firm as a result of the illegal trades. On Wednesday, authorities said the seven financiers were part of a ring that made at total of $62 million on illegal trades. They were charged with securities fraud and conspiracy. In addition to criminal charges, the Securities and Exchange Commission alleges another $15.7 million were made in illicit trades. These latest arrests come amid a major probe by the Federal Bureau of Investigation into what Bharara calls "rampant" insider trading on Wall Street. Bharara said Wednesday that so far 63 people have been charged with insider trading offenses and 56 of them have been convicted. The highest profile target to date is Raj Rajaratnam, the billionaire founder of Galleon hedge fund, who was sentenced to a record 11 years in prison in 2011. His friend Rajat Gupta, a former director of Goldman Sachs and head of McKinsey & Co, faces trial this year on insider trading charges.