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SAC Capital indicted in six-year U.S. insider trading probe

By Patricia Hurtado, Bloomberg

July 25, 2013 • Reprints

SAC Capital Advisors LP, the $14 billion hedge fund founded by Steven A. Cohen, was indicted by a U.S. grand jury as part of the government’s six-year crackdown on insider trading on Wall Street.

The charges against the Stamford, Connecticut-based hedge fund are the most significant to be brought by the U.S. since former Goldman Sachs Group Inc. director Rajat Gupta was accused of insider trading in October 2011. Gupta, convicted in New York federal court last year, was sentenced to two years in prison.

This isn’t the first time Manhattan U.S. Attorney Preet Bharara has sought charges against a business. In February 2012, his office charged Wegelin & Co., Switzerland’s oldest private bank, for helping U.S. taxpayers hide assets from the Internal Revenue Service. Wegelin pleaded guilty and was ordered to pay almost $58 million.

SAC was indicted on four counts of securities fraud and one count of wire fraud in an indictment unsealed in Manhattan federal court. The U.S. Securities and Exchange Commission, in an administrative action on July 19, accused Cohen of failing to supervise two portfolio managers who both face insider trading charges. Cohen wasn’t charged in today’s indictment.

While the agency stopped short of accusing Cohen of insider trading himself, the SEC alleged he received “highly suspicious” information and ignored “red flags” that should have caused any reasonable hedge-fund manager to investigate the basis for trades made by SAC employees Mathew Martoma and Michael Steinberg. Those trades helped the hedge fund earn profits and avoided losses of more than $275 million in 2008, the SEC said.

Charged

Martoma, 39, was charged in November by Bharara with the most lucrative insider trading case in history. Prosecutors said Martoma helped SAC reap hundreds of millions in illegal profits on tips provided by a doctor about a clinical trial about an Alzheimer’s drug being developed by Wyeth LLC and Elan Corp.

Martoma, who has pleaded not guilty, is scheduled to go to trial in Manhattan federal court on Nov. 4.

While Cohen wasn’t charged with Martoma, that case was the first to link Cohen directly to alleged inside information.

www.bloomberg.com

About the Author

Copyright 2014 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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Related Terms
U.S. Securities and Exchange Commission 958Goldman Sachs Group Inc. 864Connecticut 587Internal Revenue Service 102Preet Bharara 26private bank 20SAC Capital Advisors LP 15Steven A. Cohen 14Mathew Martoma 11Elan Corp. 9Rajat Gupta 8Wyeth LLC 6Michael Steinberg 6Wegelin & Co. 1

Free Newsletter Modern Trader Follow

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