SAC Capital, US Prosecutors Nearer "Record-Breaking" Settlement Over Allegations - Media

Eliane Chavagnon

21 October 2013

A settlement between Steven Cohen's hedge fund firm, SAC Capital, and US prosecutors to resolve a long-running criminal insider trading case could be reached this week, according to several media reports.

Cohen is reportedly “looking to put the nearly seven-year long investigation of his firm behind him,” Reuters said last week, citing a source familiar with the matter.

According to the news service, the individuals said the potential deal would be structured as both a “record-breaking” penalty and forfeiture of trading profits, allegedly derived from improper trading by Cohen's hedge fund. The penalty, according to the Wall Street Journal, might be at least $1 billion. SAC has already agreed to pay around $600 million to settle a civil lawsuit related to the matter.

“An agreement to stop operating as an investment advisor is one feature of a larger deal SAC is negotiating over insider trading charges, according to people briefed on the case,” The New York Times also said.

Meanwhile, Cohen is reportedly shedding his assets by, for example, looking to sell all or part of a some $30 million equity stake he has in Kadmon Pharmaceuticals, while The New York Times also reported last week that he’s trying to sell two Andy Warhol works.

In recent months, it has been speculated that Cohen might turn the remainder of his business into a family office, thereby avoiding certain regulatory requirements. George Soros, the hedge fund legend, took such a step, albeit for different reasons, more than a year ago.

As previously reported by Family Wealth Report, in July the SEC charged Richard Lee, a former portfolio manager at SAC Capital Advisors, with insider trading ahead of major announcements by technology companies. The same month, federal prosecutors announced criminal charges against SAC Capital Advisors, alleging that it generated hundreds of millions of dollars by allowing “systematic insider trading” from 1999 to 2010. The US authority wants to ban Cohen from the industry as part of a civil complaint that he failed to properly supervise employees now accused of illegal trading.

According previous Bloomberg reports, Lee was “at least” the 11th person to be linked with such activity at the firm. SAC told investors, clients and counterparties at the time that it will stay open for business.

SAC was founded by Cohen in 1992; it has offices in Stamford, CT, and New York City with international satellite offices.