New York: Giant hedge fund SAC Capital has agreed to plead guilty to criminal charges of insider trading and pay USD 1.8 billion to settle them, the US Attorney`s office announced Monday.
It was the largest-ever insider trading fine, the government said, and will force SAC, once a Wall Street hedge fund powerhouse run by multi-billionaire Steven A. Cohen, out of the investment advisory business permanently.
US Attorney Preet Bharara characterized the penalties as "steep but fair" and "commensurate with the breadth and duration of the charged criminal conduct," according to a plea agreement filed with the New York federal district court.
The Justice Department filed a criminal indictment in July alleging SAC ran a broad system of insider trading in which analysts were recruited for their access to company insiders and encouraged to trade for profit at all costs.
The transactions involved trading stocks of technology, pharmaceutical and other companies based on insider information, netting SAC hundreds of millions of dollars in illegal profits and avoided losses.
Six former SAC employees have pleaded guilty to insider trading, and in March SAC agreed to pay USD 616 million to settle civil insider trading charges.
SAC will receive a credit for the previous USD 616 million, making the net increase of Monday`s fine about USD 1.2 billion, a spokesman for the US Attorneys Office said.
An SAC spokesman did not return messages seeking comment Monday.
Bharara said the settlement does not preclude filing criminal charges and seeking fines and imprisonment against any individuals in the case, suggesting Cohen, prominent in New York finance and social circles, remains vulnerable.
Two SAC traders, Michael Steinberg and Mathew Martoma, still face charges that they were involved in trading stocks for the company based on insider tips they received.
In addition, the FBI`s criminal investigation into SAC is continuing, according to a person briefed on the matter.
Cohen grew SAC Capital from a small trading shop into one of the biggest financial players on Wall Street, with USD 15 billion in assets at its peak.
But since the company`s legal troubles erupted, investors have pulled billions in cash out of the company`s funds.
A prominent figure in tony Greenwich, Connecticut where he lives, Cohen is a major investor in art and real estate. He is planning to sell some USD 80 million in art in upcoming auctions at Sotheby`s and Christie`s, the New York Times reported.
In the wake of the insider trading crackdown, SAC is expected to attempt to continue to trade Cohen`s still-considerable personal funds, permitted under the deal.
Any future trading by SAC defendants will "be required to employ compliance procedures to prevent insider trading" reviewed by a government-overseen independent monitor, Bharara said.
First Published: Monday, November 4, 2013, 23:42