The settlement brings to an end a seven-year-long investigation by US prosecutors and fuels months of speculation as regards whether Cohen might turn the remainder of his business into a family office-type structure . 

“Unlawful conduct by individual employees and an institutional indifference to that unlawful conduct resulted in insider trading that was substantial, pervasive and on a scale without known precedent in the hedge fund industry,” official documents from the US Attorney’s office for the Southern District of New York say.

The filings outline that portfolio managers and research analysts from across the SAC entity “engaged in a pattern of obtaining inside information from dozens of publicly-traded companies across multiple industry sectors.” The documents add that the “relentless pursuit of an information ‘edge’ fostered a business culture within SAC in which there was no meaningful commitment to ensure that such ‘edge’ came from legitimate research and not inside information.”

SAC Capital Advisors LP, SAC Capital Advisors, CR Intrinsic Investors and Sigma Capital Management LLC are the entities responsible for the management of a group of affiliated hedge funds known as the SAC hedge fund, or SAC.

Under the agreement - which remains subject to court approval - the SAC companies will plead guilty to each count in which they are charged of an indictment unsealed in July of this year. The SAC companies were charged with securities fraud and wire fraud in connection with a large-scale insider trading scheme.

The $1.8 billion fine is split between a $900 million fine in the criminal case and a $900 million forfeiture judgment in a civil money laundering and forfeiture action. However, the $616 million amount that SAC has already agreed to pay to the Securities and Exchange Commission to resolve related civil insider trading charges will be credited against the new penalty. The additional payment required under this agreement will therefore be about $1.2 billion.

The SAC companies will each be sentenced to five-year terms of probation with a provision to end probation earlier if the SAC Companies cease operating entirely.

Part of the terms of probation will require that they employ “appropriate compliance measures to identify and prevent insider trading.” Meanwhile, the insider trading compliance measures of the SAC companies will be reviewed by an independent expert.

“The agreement relates only to the guilt of the SAC companies and resolves pending charges against only the SAC companies - it does not include any admissions pertaining to individual defendants. All criminal defendants are presumed innocent unless and until proven guilty,” said Preet Bharara, US Attorney for the Southern District of New York, and George Venizelos, the Assistant Director in Charge of the New York Office of the Federal Bureau of Investigation, in a statement.

However, it also said that, under the terms of the agreement, “the government is not prevented from charging any individual with insider trading offenses and seeking the maximum prison term authorized by law for such offenses.”

The case

The case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Bharara serves as a co-chair of the Securities and Commodities Fraud Working Group.

The task force was established to “wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes.” More than 20 federal agencies, 94 US attorneys’ offices - and state and local partners - are involved.

Over the past three fiscal years, the Justice Department said it has filed nearly 10,000 financial fraud cases against some 15,000 defendant.