Vaso Active, Millennium Find Common Ground

Wall Street wheeling and dealing can make for some strange relationships, such as the one entered into this week between Millennium Partners and Vaso Active Pharmaceuticals(VAPH Quote).

On Tuesday, the embattled hedge fund led by legendary Wall Street trader Israel Englander made a big bet on the quirky little drug company that claims to have developed a miraculous cure for athlete's foot.

The private equity arm of Millennium, in a $7.5 million private placement, purchased an 18-month convertible 2% note that can be turned into roughly 833,000 shares of Vaso Active stock, if the share price reaches $9. The deal also included warrants to purchase 166,667 shares of Vaso stock at an exercise price of $8.75.

On Tuesday, the day the deal was inked, shares of the Danvers, Mass.-based company closed at $7.03. Vaso Active stock soared 15% Wednesday to $8.11 after the company announced the transaction, leaving the shares within striking distance of both magic numbers.

News of the deal comes as Millennium and Vaso Active face regulatory scrutiny.

With $3.2 billion in assets, Millennium is one of the big hedge funds at the center of the far-reaching investigation into improper trading in the mutual fund industry. Last year, one of Millennium's top traders pleaded guilty to making illegal trades in shares of mutual funds. Englander is bracing investors for the possibility the hedge fund could be ordered to pay a stiff fine when the investigation is completed.