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NEW YORK (Reuters) – Little-known brokerage firm Monness, Crespi, Hardt & Co has long toiled in the shadows of Wall Street, but the boutique suddenly has been thrust into the limelight because of an “ideas dinner” it sponsored last month for a group of about 18 hedge fund traders.

Deals

Monness Crespi sponsors unscripted dinners from time to time, said people familiar with the get-togethers. They provide a chance for managers to swap trading ideas, network with their peers and meet some of Monness Crespi’s largely equity-focused analysts.

A February 8 dinner is sparking controversy because one of the nearly two dozen topics discussed during the program was how hedge funds could profit from a decline in the euro, one of the world’s most heavily traded currencies.

The portion of the program, at a Park Avenue townhouse on Manhattan’s Upper East Side, devoted to trading the euro took up no more than five minutes, according to people familiar with the event.

But ever since the Wall Street Journal wrote about the dinner and the discussion about the euro in a February 25 article, a shadow has been cast over much of the $1.5 trillion hedge fund industry.

The dinner adds to the growing perception among the general public and some political leaders that many hedge funds prosper by making money off misery — whether it is betting on the decline of a stock, a bond, a currency or even a country’s debt.

The U.S. Department of Justice’s antitrust division has sent letters to a number of hedge funds that attended the February 8 dinner, asking the funds not to destroy any trading records involving market bets on the euro, said people familiar with the situation.

Prominent short seller Jim Chanos said he did not attend the dinner and did not receive a letter from the Justice Department.

CNBC and Bloomberg first reported on the letters from the Justice Department. The Wall Street Journal subsequently reported that the Justice Department sent out those letters on the same day that its story about the dinner was published.

“I don’t believe that it is illegal to discuss in conceptual terms whether the euro should be trading lower,” said Paul Roth, a founding partner of law firm Schulte Roth & Zabel, which represents some prominent hedge funds.

“But given the crisis in Europe and considering the view many Europeans have of hedge funds and private equity funds, there may well be a political component to all of this.”

The Justice Department’s interest in euro trading comes amid widespread criticism of hedge funds for betting on a decline in Greece’s sovereign debt.

During the depths of the financial crisis, hedge funds also came under fire for betting against shares of Lehman Brothers and Bear Stearns as those investment firms were collapsing.

But it is not clear just how central the discussion of the euro was to the February 8 dinner now drawing so much scrutiny.

Neil Crespi, president of Monness Crespi, said as a general rule his firm doesn’t talk to reporters. But before he ended a brief phone conversation, Crespi said the dinner has been mischaracterized in the media.

“Everything is wrong,” he said. “We trade only equities. I am not saying we didn’t have an ideas dinner, but we aren’t a macro firm.”

In fact, people familiar with the dinner said much of the discussion focused on stocks. The dinner was tape recorded and transcribed into a research report that was circulated by Monness Crespi after the event.

The suggestion to bet against the euro was raised by Aaron Cowen, a portfolio manager with Steven A. Cohen’s SAC Capital Advisors LP. People familiar with the dinner said there was little discussion about the euro after Cowen raised it.

A SAC spokesman declined to comment.

“If only the poor fellow had couched it in terms of going long the dollar instead of shorting the euro, I dare say he would have been called patriotic,” Chanos said.

Other guests at the dinner, according to the Journal and sources, included David Einhorn, head of Greenlight Capital LLC, and a representative from Soros Fund Management LLC, the firm founded by George Soros.

A Greenlight spokesman declined to comment.

Soros’ fund is still well known for having made $1 billion in a day by betting against the British pound in 1992.

A spokesman for Soros said that is has become commonplace to direct attention toward George Soros whenever currency markets are in the news. “Any suggestion of wrongdoing by Soros Fund Management LLC implied in those articles is without merit,” the spokesman said, adding that the firm intends to cooperate fully with any governmental requests.

It is not clear exactly why the Justice Department has asked the hedge fund to save trading records.

Some lawyers pointed out that federal authorities might never actually request the documents and all of this could be a preliminary measure.

In an antitrust investigation, regulators generally look for a pattern of collusion by a group of traders, or a common agreement to make the same trades to manipulate a market.

However, there is nothing to suggest any of that occurred at the February 8 dinner.

Indeed, investment managers have long talked shop over steaks and wine or during a round of golf, and industry insiders are puzzled at why this long-standing practice is suddenly drawing such scrutiny.

The focus by the news media on whether hedge funds got together to jointly bet against the euro strikes some managers and lawyers as particularly odd considering that the currency markets are among the world’s largest and most liquid.

Ron Resnick, co-founder of regulatory consulting firm CounselWorks and a former managing partner at hedge fund firm Highbridge Capital Management, said: “Not even God alone could move the euro market.”

Still, the dinner investigation could result in some changed behavior, at least in the short-term. Some managers said social gatherings will continue, but the venues for meeting may be different and more structured.

“Since the line of what you can and can’t do is so unclear right now, people are going to try to stay further away from it,” CounselWorks’ Resnick said.

(Editing by Gerald E. McCormick and Steve Orlofsky)