U.S. charges SAC Capital with insider trading crimes
By Emily Flitter, Svea Herbst-Bayliss and Jonathan Stempel
NEW YORK (Reuters) - Federal prosecutors came down hard on billionaire hedge fund manager Steven A. Cohen on Thursday, unveiling criminal fraud charges against his SAC Capital Advisors LP that could end the career of one of Wall Street's most successful investors.
Cohen stands accused of presiding over a broken business where employees were encouraged to push the envelope to get that extra investing edge, with little regard for whether they were acting honestly and within the law.
The result was "insider trading that was substantial, pervasive and on a scale without known precedent in the hedge fund industry," the government said.
Thursday's indictment, and a related civil case seeking an asset freeze and money laundering penalties, imperils the future of SAC, a roughly $15 billion hedge fund that has posted some of its industry's best returns and established Cohen as one of the best traders of his generation.
While not personally charged criminally, Cohen joins Drexel Burnham Lambert chief Michael Milken and Galleon Group hedge fund founder Raj Rajaratnam among prominent Wall Street executives associated with insider trading.
The rare move by the U.S. Department of Justice to indict a powerful financial firm could end Cohen's career managing outside money. It reflects what prosecutors and the FBI see as pervasive wrongdoing at SAC that hurts investors generally.
"SAC not only tolerated cheating, it encouraged it," FBI assistant director George Venizelos said in a statement.
The charges also cap a seven-year investigation of SAC, amid a broader crackdown on insider trading resulting in more than 70 convictions and guilty pleas. Continued...