Facing charges from the U.S. Securities and Exchange Commission (“SEC”), Major hedge fund, SAC Capital Advisors, announced its intent, this week, to plead guilty to allegations that the company profited handsomely from illegal insider trading. As part of the guilty plea SAC has agreed to pay $1.8 billion, the largest financial penalty ever to result from insider trading claims. Additionally, the company will no longer operate as an investment adviser or invest third-party funds. Government officials described the penalties as “steep but fair” and “commensurate with the breadth and duration of the charged criminal conduct.”
The federal government alleges that SAC managers and analysts illegally executed trades, based on inside information, between 1999 and 2010 to the tune of hundreds of millions of dollars. According to the lead prosecutor, U.S. Attorney for the Southern District of New York, Preet Bharara, the company “trafficked in inside information on a scale without any known precedent in the history of hedge funds.” The funds managed by SAC were a roughly equal mix of client and employee money.
SAC’s plea will not resolve a pending case, brought by the SEC, against the company’s founder Steven A. Cohen. According the SEC’s civil suit, Cohen, a billionaire and financial rock star, failed to prevent the insider trading that was so rampant throughout his company. For his part, Cohen flatly denies the SEC’s allegations.
It is unknown at this time whether a whistleblower’s tip played a role in the SEC’s investigation. However, if that was indeed the case, that individual or group of individuals may receive up to ten to thirty percent of the government’s total recovery, pursuant to the SEC’s Whistleblower program under Dodd-Frank.
McEldrew Young Purtell is a law firm representing SEC whistleblowers reporting securities fraud such as insider trading to the U.S. Government. For a free confidential consultation, please call Eric L. Young, Esquire at (800) 590-4116 or complete ou online form to contact us.