NEW YORK, Jan 25 (Reuters) - U.S. securities regulators said on Monday they would not oppose making a rare settlement refund of $21.5 million to hedge fund Level Global Investors LP after a federal appeals court's ruling that made pursuing insider trading cases tougher.
The U.S. Securities and Exchange Commission's position was laid out in a letter filed in federal court in Manhattan, after the defunct Connecticut hedge fund asked a federal judge to vacate the 2013 settlement and order the SEC to repay it.
Level Global's request requires approval by U.S. District Judge Shira Scheindlin. Neither the SEC nor a lawyer for Level Global responded to requests for comment.
The development came after a co-founder of Level Global, Anthony Chiasson, won a federal appeals court ruling in December 2014 that reversed his conviction for trading on inside information about Dell Inc and Nvidia Corp.
Prosecutors have said the ruling by the 2nd U.S. Court of Appeals in New York, which also overturned the conviction of Todd Newman, a former Diamondback Capital Management portfolio manager, limited their ability to pursue insider trading cases.
After the U.S. Supreme Court in October declined to review the decision, prosecutors dropped charges against others in the case, including a former analyst, Spyridon Adondakis, who had previously pleaded guilty.
The SEC's case against Level Global had been based on the same claims that Chiasson and Adondakis engaged in repeated insider trading in the securities of Dell and Nvidia.
Authorities had said that Adondakis belonged to a "corrupt circle" of hedge fund analysts who traded nonpublic information obtained from employees at various companies, and that Adondakis passed along information to Chiasson.
Level Global, which had once managed as much as $4 billion, closed in 2011 following a raid by the Federal Bureau of Investigation in November 2010.
Its other co-founder, David Ganek, in February 2015 sued various U.S. law enforcement officials claiming the government's raid was improper. The lawsuit remains pending.
The Supreme Court meanwhile last week took up a different case out of California that raises similar issues over what constitutes insider trading.
The case is U.S. Securities and Exchange Commission v. Adondakis et al, U.S. District Court, Southern District of New York, No. 12-00409. (Editing by Matthew Lewis)