Hedge fund indicted on securities fraud, wire fraud in high-profile case
While its owner was charged with lax management, $15 bn hedge fund SAC Capital itself has been indicted for insider trading in one of the highest-profile investigations in the history of the hedge fund industry.
The US Department of Justice has charged SAC Capital with four counts of securities fraud and one count of wire fraud in connection with one of the most in-depth investigations into alleged insider trading and fraud at one of the world’s most successful hedge funds. The charges, filed along with another civil suit, could force the dissolution of the fund.
Allegations include routinely breaking securities law, the creation of a culture of insider trading and the intentional hiring of employees with insider contacts. At least 11 former and current SAC employees have been implicated in the case, along with hundreds of millions of dollars in illegal trading profits involving around 20 companies.
‘At various times between in or about 1999 through at least in or about 2010, employees and agents of [SAC Capital] obtained material, non-public information relating to publicly traded companies and traded on that inside information,’ reads the indictment. SAC ‘committed the insider trading scheme through the acts of, among others, numerous portfolio managers… and research analysts… who engaged in a pattern of obtaining inside information from dozens of publicly traded companies across multiple industry sectors.’
Last week, days before the statute of limitations was set to run out at the end of July, the SEC charged SAC Capital owner Steven Cohen with the administrative charge of failing ‘to reasonably supervise’ employees who have been charged with insider trading. The SEC also said it is ‘seeking to bar Cohen from overseeing investor funds.’
Earlier this year, the SEC won its biggest ever settlement for an insider trading case when SAC Capital agreed to pay more than $600 mn in relation to the probe.
