SAC Capital chief Steven Cohen is likely to avoid criminal charges relating to insider trading, as U.S. prosecutors don’t have enough evidence.
According to a report in The Wall Street Journal, the U.S. prosecutors have concluded that they don’t have sufficient evidence to convict the hedge fund billionaire before a July deadline.
The recent conclusion of the U.S. prosecutors is in line with the earlier expectation, wherein insiders from SAC Capital said founder Steve Cohen will not be “charged criminally” and that he will “survive” the insider trading probe.
Charges Against Cohen Relate To 2008 Transactions
The charges against the hedge fund billionaire relate to trades made in July 2008.
The transactions relate to the trades made by the hedge fund in the shares of the drug makers Elan Corporation, plc (ADR) (NYSE:ELN) and Wyeth Limited (NSE:WYETH). Federal prosecutors in Manhattan have alleged that Mathew Martoma, a former portfolio manager at SAC unit CR Intrinsic Investors, received inside information about the results of an Alzheimer’s drug trial, allowing the hedge fund to record more than $275 million in profits and losses avoided.
Insider Trading Charges To Be Made In 5 Years
Insider-trading charges have to be made within five years of the conduct in question. Due to the five-year deadline imposed to file securities fraud charges, the prosecutors have time till mid-July to bring a case against the hedge fund related to those trades.
U.S. prosecutors hoped to extract information from Mathew Martoma that could be used against his former boss. However, the portfolio manager has not implicated Cohen. When two federal agents approached Martoma, he reportedly fainted in the front yard of his Florida home. According to people familiar with the probe, Martoma refused to cooperate with the U.S prosecutors.
The U.S. prosecutors’ recent conclusion would be a setback to the Justice Department, but provide a boost to SAC’s Steven Cohen who is considered one of the $2 trillion hedge fund industry’s best known and most successful traders. He has been generating an average annual return of 25 percent over the life of his 20-year-old firm.
According to a Bloomberg report, the insider trading probe against SAC could last years. Based on the five-year statute of limitations on insider trading charges, probes into potentially improper trading in Weight Watchers International (NYSE:WTW) in 2011 and InterMune Inc (NASDAQ:ITMN) in 2010 give prosecutors until 2016 to make a case