Hedge Funds Face Probe Over Euro Collusion: Report


The Justice Department is looking into whether hedge funds worked together to drive down the value of the euro, according to a report Wednesday in The Wall Street Journal.

Government Regulation

The Justice Department asked hedge funds, including SAC Capital Advisors,Greenlight Capital,Soros Fund Management and Paulson & Co., to keep all trading records tied to euro trading, according to the report which cited unidentified people familiar with the matter.

The investigation is likely to determine if the hedge funds coordinated their bets that the euro would fall. However, proving such cases is hard because investigators must show the hedge funds intentionally sought to act together, the newspaper said.

The department inquiry comes as other regulators examine derivatives trades that big Wall Street banks made with Greece.

The debt-burdened country is trying to slash its budget and reach terms on a bailout package with other European countries. Analysts and investors are concerned that if Greece and some other European nations like Spain and Portugal cannot get their debt problems under control, it could destabilize the euro and upend a global economic recovery.

The euro has steadily declined in recent months because of the debt troubles among the 16 countries that use the currency, including Greece and Spain.

Faber Report: Euro Shorts

ts value recently hit nine-month lows compared against the dollar and has dropped 10 percent over the past three months.

The euro rose slightly against the dollar on Wednesday, hitting $1.3634 in early trading.

The Journal said some of the hedge funds were betting the euro would fall to parity with the dollar, which would mean another 27 percent drop in its value.