WASHINGTON (AP) — Federal investigators have turned up the heat on Wall Street, raiding three hedge funds in what one of the targets called a wide-ranging probe of insider trading.

The FBI on Monday searched the New York offices of Level Global Investors LP, and the Stamford, Connecticut, headquarters of Diamondback Capital Management LLC, a law enforcement official said. The official spoke on condition of anonymity because he was not authorised to discuss an ongoing case.

Another FBI official said the agency also searched a third site, at 30 Federal St. in Boston. Hedge fund Loch Capital Management LLC has its headquarters at that address.

The FBI said in a statement that it had executed search warrants in the three states "in an ongoing investigation." Agency spokesmen said they could not comment further because the court documents are under seal.

A spokesman for Level Global acknowledged the raid took place.

"We can confirm that agents from the Federal Bureau of Investigation visited our offices this morning as part of what we believe to be a broader investigation," the spokesman said in a statement.

Four men wearing overcoats and badges emerged late on Monday from the Level Global offices in midtown Manhattan, pulling rolling suitcases behind them and carrying nylon backpacks. They declined to answer reporters' questions.

In Stamford, security guards ordered journalists to leave the premises of the high-rise building housing the offices of Diamond Capital Management. Three men were seen leaving the building in an FBI vehicle on Monday evening.

The raids rattled Wall Street and bank shares slumped on Monday and yesterday as news of FBI action spread. Several white-collar defence lawyers in New York said they were bombarded by calls from traders seeking representation.

The FBI and other law enforcement agencies are investigating insider trading by hedge funds, mutual funds and investment bankers, the Wall Street Journal reported this weekend. The companies allegedly earned tens of millions in illegal profits using secret information about mergers, according to the Journal.

Diamondback and Level Global both are run by former managers of SAC Capital Advisors LP, of Stamford. Diamondback manages about $4.71 billion, according to public filings. Level Global manages $3.09 billion, filings show.

Loch Capital is run by brothers Timothy and Todd McSweeney. The brothers have been linked in news reports to hedge-fund manager Steven Fortuna. Fortuna pleaded guilty last year to charges stemming from an earlier insider trading investigation by the Securities and Exchange Commission.

Workers at Loch Capital declined to answer calls placed by a reporter through the office building's intercom. A worker at the building who declined to be identified said the McSweeney brothers left their offices at around noon and did not return.