Hedge fund reveals SEC probe

Pequot Capital Management sent a letter to investors telling them about the charges and possible penalties. The letter also said the pending charges are "without merit," The New York Times reported Wednesday.

Arthur Samberg said in May he would close the fund he runs if an investigation into its operations was reopened, the Times said. However, the letter sent Monday said the firm intends to "defend the matter vigorously."

The investigation relates to trades in Microsoft securities that took place in 2001. It was reopened after a former Microsoft employee's divorce proceedings revealed Samberg had paid the former employee, David Zilkha, $2.1 million in 2007.

Zilkha had worked for Pequot six years prior to the payment, the Times reported.

Copyright 2009 by United Press International.