U.S. to put SAC hedge fund out of business over insider trading

Mon Nov 4, 2013 6:17pm EST
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By Emily Flitter, Katya Wachtel and Matthew Goldstein

NEW YORK (Reuters) - Steven A. Cohen faces an abrupt end to his career as one of the world's most successful traders after his SAC Capital Advisors became the largest Wall Street firm in years to agree to plead guilty to criminal charges of insider trading, and pay $1.2 billion in fines.

But Cohen, a multi-billionaire and renowned modern art collector, has not been personally charged with any crime and will likely continue managing some $9 billion of his own money through a lightly regulated family office once the hedge fund's plea deal is approved by the courts.

The winding down of the hedge fund's advisory business, which began returning billions of dollars to investors earlier this year as a criminal investigation heated up, requires SAC to install an independent compliance monitor if it continues to trade in the near term, something that will be a big change for Cohen who is known to be a micro-manager.

SAC's guilty plea and fine, announced by prosecutors on Monday, is in addition to a $616 million settlement with the U.S. Securities and Exchange Commission.

Manhattan U.S. Attorney Preet Bharara said at a press conference that the plea deal sends a message to Wall Street that no "institution is too big to jail." He rejected criticism that the plea is something of a disappointment because Cohen himself was not charged with any criminal wrongdoing.

"What happened today is a very substantial and important thing," said Bharara. "It is a rare thing for an entity to be held to account."

Cohen's fund, which once employed more than 900 people with offices on three continents, will no longer manage money for outside investors including pensions, endowments and wealthy individuals, according to the settlement.

Jonathan Gasthalter, a spokesman for SAC Capital, said the firm is taking "responsibility for the handful of men who pleaded guilty" to insider trading while working at the hedge fund. But he added the firm has "never encouraged, promoted or tolerated insider trading."   Continued...

Hedge fund manager Steven A. Cohen, founder and chairman of SAC Capital Advisors, responds to a question during an interview in Las Vegas in this file photo taken May 11, 2011. REUTERS/Steve Marcus/Files