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Diamondback Capital to close after clients pull funds

Despite strong returns, Diamondback Capital Management L.L.C., a Stamford-based hedge fund that had assets of more than $5 billion as recently as two years ago, announced in a Dec. 6 letter that it would close down.

Writing to investors, co-founders Richard Schimel and Larry Sapanski attributed the firm’s closure to a larger-than-anticipated pullout of clients’ funds, according to reports. Investors have requested that Diamondback return more than $520 million, the letter is reported to have said.

The firm’s assets have declined since a 2010 raid by the FBI as part of an insider trading investigation. While the founders and the firm were never formally charged with fraud, the fund’s assets have reportedly shrank to $1.45 billion since the federal probe.

Diamondback was founded by Schimel, Sapanski and Chad Loweth in 2005, with the firm averaging an annual return of 9 percent since its establishment. All three founding partners had previously worked at SAC Capital Advisors, headed up by Steven A. Cohen and also based in Stamford.

According to reports, Diamondback expects to lay off nearly all of its 133 employees, with a handful staying on to manage liquidation proceedings. The firm expects to return its clients’ funds over the next month, the letter reportedly states.

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