SAC Capital Insider Trading record fines


Steven A. Cohen was once regarded as one of Wall Street’s leading fund managers, managing SAC Capital, until…

On November 20, 2012, according to The Wall Street Journal, Cohen was implicated in an alleged insider trading scandal involving an ex-SAC manager, Mathew Martoma. Cohen was not directly named in an indictment released in New York, but was referred to as “Portfolio Manager A” “according to people familiar with the matter.”[20][21] Reuters reported that Cohen “personally signed off on” the trades that are being investigated, but that “experts said prosecutors lack proof that Cohen knew the trades … were based on inside information”.[22] A SAC spokesman later stated that “Mr. Cohen and SAC are confident that they have acted appropriately and will continue to cooperate with the government’s inquiry,” according to The Wall Street Journal.[23] Article

Today, prosecutors are going for a record breaking settlement.

The WSJ has more on this latest example of US Justice in action:

Hedge-fund group SAC Capital Advisors LP and federal prosecutors have agreed in principle on a penalty exceeding $1 billion in a potential criminal settlement that would be the largest ever for an insider-trading case, according to people familiar with the matter.

The payment by SAC, run by star manager Steven A. Cohen, is expected to be roughly $1.2 billion to $1.4 billion, according to these people.

The penalty means SAC would pay the U.S. government a total of nearly $2 billion, including a $616 million penalty the firm agreed to in a civil insider-trading settlement with the Securities and Exchange Commission in March.

The firm didn’t admit or deny wrongdoing in the civil settlement, which is awaiting approval by a federal judge. The penalty SAC agreed to pay in the SEC case had been the largest to date in an insider-trading case.

SAC has denied the criminal charges. The firm says Mr. Cohen, who hasn’t been accused of criminal wrongdoing, has done nothing wrong. Any settlement wouldn’t affect a continuing criminal investigation into Mr. Cohen’s trading activities, the people said.

Of course, the fines will be paid from investor money, NOT from the personal fortunes Mr. Cohen has amassed from management fees.  His net worth currently stands at $9.3 Billion, all made from Wall Street (mostly from fees).  His mother was a part-time piano teacher and his father was a dress manufacturer.

Earlier this year, when the SEC extracted $616 million from Cohen’s fund in two regulatory settlements, he expressed his deep remorse by buying, within weeks, a $155 million Picasso and a $60 million beach house in the Hamptons, right down the road from his other Hamptons beach house, worth $18 million.

Further reading

Is Steven A. Cohen Buying Off the U.S. Government?