Insider trading evidence against SAC Capital Advisors LP includes court-authorized wiretaps, a U.S. prosecutor said at the $14 billion hedge fund’s arraignment in federal court in Manhattan.
“The discovery will be voluminous, including a large number of electronic recordings, including electronic messages, instant messages, court-authorized wiretaps and consensual recordings,” Assistant U.S. Attorney Antonia Apps told U.S. District Judge Laura Taylor Swain today about the pretrial evidence-gathering process. “In short, a tremendous volume.”
Prosecutors didn’t specify whether the wiretaps were directed at SAC founder and owner Steven A. Cohen or any other SAC employee. Cohen wasn’t in court today for the hearing that lasted about 15 minutes.
Inside the crowded courtroom, the defense table was lined with six criminal lawyers for SAC. Peter Addison Nussbaum, SAC’s general counsel, entered a not guilty plea on behalf of each of the four SAC business entities.
The U.S. alleges that the four units are culpable for allowing insider trading to become institutionalized as a way of doing business at the Stamford, Connecticut-based hedge fund.
Manhattan U.S. Attorney Preet Bharara, who announced the charges yesterday, called SAC “a veritable magnet for market cheaters” and said the fund was being held responsible for insider trading by seven portfolio managers and analysts who worked there. He said that since the firm was founded in 1992, it has never reported criminal wrongdoing to regulators or authorities.
“A company reaps what it sows, and as alleged, SAC seeded itself with corrupt traders empowered to engage in criminal acts by a culture that looked the other way, despite red flags all around,” Bharara said.
SAC allegedly perpetrated what prosecutors called an unprecedented insider-trading scheme that spanned more than a decade. The indictment was the most high-profile case to be brought since former Goldman Sachs Group Inc. director Rajat Gupta was charged in 2011, and it’s the latest insider trading case in the government’s six-year crackdown on Wall Street crime.