$1.2 billion settlement expected in SAC Capital insider trading case

Preet Bharara, United States Attorney for the Southern District of New York speaks at a news conference July 25, 2013 about a federal indictment against SAC Capital, the hedge fund run by billionaire Steven A. Cohen. SAC Capital Advisors was charged in federal court in Manhattan in an indictment with wire fraud and four counts of securities fraud, as prosecutors allege the crimes were carried out from 1999 through at least 2010. 

A settlement is expected today between federal prosecutors and hedge fund SAC Capital Advisors over allegations of insider trading. SAC would pay $1.2 billion -- the largest fine ever for insider trading. 

Prosecutors have alleged that such trading was systematic at SAC. Eight employees of the firm have been accused, six of whom have pleaded guilty.

As part of the settlement, the firm is expected to admit criminal wrong doing. Jeff Smith, an attorney with DeCotiis, Fitzpatrick & Cole and a former federal prosecutor, says the fact that SAC was a once reputable and powerful firm is significant. “SAC is one of the rare defendants that has resources that come close to matching what the government has,” he says, “so it’s been a pretty fair fight.”

The hedge fund’s owner, billionaire Steven Cohen, is also facing a separate civil suit from the SEC for allegedly ignoring “red flags” that insider trading was occurring. The FBI is reportedly still analyzing trading records, and the two employees who pleaded not guilty are awaiting trial. Smith says the fallout is far from over. “The government is going to continue to try to go after as many players and senior individual players on Wall Street -- at SAC or otherwise -- as they can”
 
SAC maintains it did not promote insider trading.  

About the author

Sabri Ben-Achour is a reporter for Marketplace, based in the New York City bureau. He covers Wall Street, finance, and anything New York and money related.

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