Giant hedge fund SAC Capital agrees to plead guilty to insider trading and pay US$1.8b settlement

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.