Giant hedge fund SAC Capital agrees to plead guilty to insider trading and pay US$1.8b settlement
SAC Capital - run by Steven Cohen - also agrees to make a US$1.8b payment to settle the case
Giant hedge fund SAC Capital has agreed to plead guilty to criminal charges of insider trading and pay US$1.8 billion to settle them, the US Attorney's office announced yesterday.
SAC, run by multi-billionaire Steven Cohen, also agreed to give up its investment advisory business altogether, the US Attorney said in a statement released on Twitter.
The Justice Department filed a criminal indictment in July alleging SAC ran a broad system of insider trading in which analysts were recruited for their access to company insiders and encouraged to trade for profit at all costs.
The trades involved trading stocks of technology, pharmaceutical and other companies based on insider information, netting SAC hundreds of millions of dollars in illegal profits and avoided losses.
Six former SAC employees have pleaded guilty to insider trading, and in March SAC agreed to pay more than US$614 million to settle civil insider trading charges.
The settlement, which has been under negotiation for several weeks, will be seen as a blow to Cohen and his reputation as one of the greatest stock traders of his generation. But people familiar with the billionaire trader say he is looking to put the nearly seven-year investigation of his firm behind him.
The hugeing penalty against a hedge fund firm comes as Cohen is trying to shed some assets. Spokesmen for the Federal Bureau of Investigation and SAC Capital had declined to comment ahead of the plea.
SAC Capital is in the process of returning much of the US$5 billion in outside money it manages for others. About US$6 billion of the firm's money belongs to Cohen and his employees.
It has been reported payment to the government would be structured as both penalty and forfeiture of trading profits allegedly derived from improper trading by Cohen's hedge fund, a source with knowledge of the case said.
Cohen has not been charged with criminal wrongdoing. But the regulatory authority - the Securities and Exchange Commission - did file an administrative proceeding against him charging him with failing to properly supervise his traders.
Additional reporting by Reuters