Lawyers representing Steven Cohen’s SAC Capital Advisors initiated a settlement talk with prosecutors in Manhattan last week, sources familiar with the matter told Sheelah Kolhatkar of Bloomberg Businessweek.  Steven Cohen is interested in settling the criminal charges against his $15 billion hedge fund and civil charges against him. Sources said that sweeping settlement of the criminal case may involve a hefty fine, which may be close to $1 billion.

SAC Capital advisors logo

SAC Capital sees massive exodus

Sources said that regulators want to penalize SAC Capital without damaging third parties such as investors. Over the past few years, the firm has been plagued by investigation by the Securities and Exchange Commission, the U.S. Attorney’s Office and the FBI. The FBI has so far arrested eight former and current employees of SAC Capital in insider trading cases.

On July 25, a grand jury filed a criminal case against SAC Capital. The jury accused the firm of rampant securities fraud. Prosecutors said that the scale of insider trading done by SAC Capital traders was unprecedented in the history of the hedge fund industry. However, Steven Cohen rejected all charges, saying that his firm has always behaved appropriately. SAC Capital, one of the most successful hedge funds, has about $15 billion of assets under management. The firm has witnessed a massive exodus from investors who have put about $6 billion into the hedge fund.

SAC Capital chief to be barred from securities industry?

A week prior to that, the Securities and Exchange Commission had filed a civil case against Steven Cohen. The SEC accused the hedge fund manager of failing to properly oversee two portfolio managers of SAC Capital who were engaged in rampant insider trading. The civil case has been put on hold due to the ongoing criminal proceedings. The civil case could result into Steven Cohen being barred from the securities industry.

SAC Capital Advisors has already paid more than $600 million to settle insider trading charges. A trial for the two traders accused of insider trading will begin in November this year. Steven Cohen has a net worth of $9 billion. If he strikes a deal with regulators, even with about $1 billion fine, he will still have about $8 billion to manage.