Federal prosecutors are preparing to charge as early as this week the $15 billion hedge fund run by SAC Capital Steven Cohen.
Though a number of individuals might face criminal charges, Steven Cohen however, will not be charged for alleged insider trading that the hedge fund has been subjected to for the past decade.
When Baupost, the $30 billion Boston-based hedge fund now managed by Seth Klarman, was founded in 1982, it was launched with a core set of aims. Q4 2021 hedge fund letters, conferences and more Established by Harvard professor William Poorvu and a group of four other founding families, including Klarman, the group aimed to compound Read More
The planned charges would mark the end of a year-long probe by the prosecutors against SAC Capital.
Earlier, it was reported that the U.S. prosecutors have concluded that they don’t have sufficient evidence to convict Steven Cohen before a July deadline.
Insiders in SAC too indicated the billionaire investor will not he ‘charged criminally’ and that he will ‘survive’ the ‘insider trading’ probe.
Timing of charges could be delayed
Kara Scannell of Financial Times, citing known sources, indicated the timing of criminal charges against SAC could be delayed in case SAC strikes a deal, though apparently there is no sign of any talk for now.
Kara Scannell pointed out financial institutions are rarely indicted due to the broader collateral damage such indictment would inflict.
Charges relate to 2008 trades
The charges against the hedge fund relate to trades it made in July 2008 in the shares of the drug makers Elan Corporation, plc (NYSE:ELN) and Wyeth Limited (BOM:500095) (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.
The SEC also alleged that Cohen sold off hundreds of thousands of shares of Dell Inc. (NASDAQ:DELL) in August 2008, after Steinberg sent Cohen an email that included nonpublic information about Dell’s disappointing earnings set to be reported days later.
However, a couple of days back, SAC Capital rebutted SEC allegations in a detailed memo to employees.
SAC Capital Cohen – the most successful trader
Steven Cohen is considered one of the $2 trillion hedge fund industry’s best known and most successful traders. His 20-year old firm generated an average annual return of 25 percent.
However, following the insider trading charges, some investors were jittery and withdrawn about $5 billion from the hedge fund.
As of May, the hedge fund managed about $14.5 billion of which Steven Cohen has about $7.5 billion in SAC funds while employees hold $1.5 billion of assets.