According to The Wall Street Journal, hedge fund SAC Capital Advisors is expected to plead guilty to criminal charges involving securities fraud allegations as early as next week. The multibillion-dollar hedge fund is owned by billionaire Stephen Cohen.
Sources told the WSJ that SAC will plead guilty as part of a settlement to resolve insider trading allegations made by federal prosecutors. Also, Cohen is expected to agree to stop managing money outside the fund and pay about $1.2 billion in government penalties—the largest penalty ever for insider trading.
Meantime, SAC and Cohen are still in the middle of hashing out the securities case filed by the Securities and Exchange Commission. That civil lawsuit also seeks a ban against Cohen from managing outside funds because he allegedly disregarded signs that insider trading was taking place at his firm. They say he inadequately supervised employees, allowing the fraud to happen.
Following any or either settlement, Cohen would still be under investigation for possible criminal charges, even though, say the same sources, charges are unlikely.
It was in July that federal prosecutors in Manhattan got an indictment against four SAC units, which is unusual seeing as hedge fund groups rarely face criminal charges for insider trading. The government accused the firm of “unlawful conduct by employees” and “institutional indifference” to the alleged misbehavior. Prosecutors believe there was insider trading going on far back as 1999 and that this resulted in illegal profits of hundreds of millions of dollars even as the fund avoided losses. At least eight ex-SAC employees were charged, with a number of them pleading guilty.
SAC denied the allegations.
SAC and Insider Trading Charges
Investigators have been looking into SAC and Cohen for some time now. In March, the firm agreed to pay about $615 million to the SEC to settle allegations of insider trading by now ex-portfolio managers Michael Steinberg and Mathew Martoma. Both, who have pleaded not guilty to the criminal charges, are schedule to go on trial next month.
Martoma allegedly sold and shorted shares of Wyeth and Elan shares using unpublicized information from drug trials. Steinberg is accused of insider trading involving Nvidia and Dell stocks. Meantime, the SAC profited (at least $276 million from Martoma’s purportedly illicit trades alone).
In the wake of the insider trading allegations against SAC, a number of large investors went on to redeem money from the hedge fund. In mid-February, about $1.67 billion was redeemed by investors. In March, over half of the $15 billion that SAC managed belonged to employees and Cohen.
The Resolution Law Group’s insider trading lawyers represent investors seeking to recoup losses stemming from securities fraud. Your best bet if you want to recoup your losses is to speak with an experienced securities attorney and find out about your options.