The United States Department of Justice (DOJ) is expected to file a criminal case against SAC Capital, the hedge fund headed by billionaire investor Steven A. Cohen, on Thursday, according to a report from Reuters based on information from people with knowledge about the issue.
SAC Capital charged with fraud
SAC Capital will be charged with securities and wire fraud after almost seven years of investigation against the hedge fund on accusations of insider trading. A source familiar with the issue said authorities have no intention of filing criminal charges against Cohen. However, the billionaire investor will face an administrative hearing and he could face allegations of failing to supervise his employees, who committed insider trading activities under his supervision. The Securities and Exchange Commission (SEC) could penalize Cohen and even bar him from overseeing any investment fund, which could lead to closure of SAC Capital.
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According to a spokesperson for the hedge fund, Cohen will vigorously deny the failure-to-supervise allegations against him.
Last May, it was reported that Cohen is considering the idea of closing SAC Capital and opening a “family office” to manage his personal fund. The billionaire investor has $9 billion investments in his hedge fund. The report emerged after Cohen received a subpoena to testify before a grand jury after SAC Capital failed to reach a settlement agreement to end the insider trading investigation against it.
Cohen claims Fifth Amendment
Earlier this month, Cohen claimed his right to the Fifth Amendment to prevent self incrimination in connection with the insider trading investigation. Several lawyers following the investigation against the hedge fund opined that they will give the same advice to Cohen, given the fact that authorities are trying to build a case against him.
Authorities intensified their investigation, and they are currently investigating some of the previous employees of SAC Capital, including former technology stock trader Dipak Patel, who managed almost $1 billion worth of investments during his tenure at the hedge fund. Sources said he could face criminal charges after being implicated in a possible improper trading committed by Wesley Wang, a former SAC Capital analyst who pleaded guilty and agreed to cooperate as a witness for the prosecutors.
At present, nine executives, as well as nine former and current employees of SAC Capital, have been charged or implicated in insider trading activities, including Mathew Martoma and Michael Steinberg, who were both arrested.