Billionaire Steven Cohen’s SAC Capital Advisors LP, the hedge fund firm accused of fostering a culture of rampant insider trading, has agreed to plead guilty to a federal indictment and pay $1.8 billion, the U.S. said.
The company, charged earlier this year, was accused of operating a conspiracy stretching back to 1999, reaping hundreds of millions of dollars in illicit profit. Cohen, 57, wasn’t charged in the indictment of the Stamford, Connecticut-based firm. He still faces an administrative action filed by the U.S. Securities and Exchange Commission for his alleged failure to supervise the hedge fund’s activities.
The fund’s penalty includes $616 million that Cohen, SAC’s founder and owner, agreed to pay the SEC to settle a related lawsuit in March. SAC has agreed to terminate its investment advisory businesses, “effectively closing the affiliate SAC capital hedge funds to outside investors,” the U.S. said.
“The aggregate $1.8 billion financial penalty is -- to the government’s knowledge -- the largest financial penalty in history for insider trading offenses,” prosecutors said in a court filing.
Jonathan Gasthalter, a spokesman for SAC at Sard Verbinnen & Co., didn’t respond to requests for comment on the agreement.
The plea deal isn’t the end of the U.S. investigation of SAC or Cohen, who has been the target of the multi-year probe. Two insider-trading trials in the next three months of managers at his hedge fund may shed more light on its internal workings, and prosecutors continue to investigate trading by SAC employees in Gymboree Corp., a children’s-apparel maker, a person familiar with the matter said.
The SAC agreement provides “no immunity from prosecution for any individual and does not restrict the government from charging any individual for any criminal offense,” the government wrote in the court filing.
“It’s far easier for SAC Capital as a corporate entity to plead guilty and settle with the government because it doesn’t have to worry about being incarcerated,” Anthony Sabino, a professor of law at St. John’s University in New York, said in an interview. “The government has amassed tons of evidence against the fund which can’t be helpful to the others. The pressure’s on for one of them to plead guilty.”