Cohen's career in jeopardy as SAC Capital pleads guilty
06 November 2013
Steven A Cohen's career as one of the world's most successful traders could end abruptly following his firm SAC Capital Advisors agreeing to plead guilty to criminal charges of insider trading, and a payment of $1.2 billion in fines (Also see: SAC Capital to wind up after record $1.8-bn insider trading penalty)
However Cohen, who is one of the most successful traders, a multi-billionaire and renowned modern art collector, has not been personally charged with any crime.
According to commentators, he is likely to continue managing some $9 billion of his own money through a lightly regulated family office on approval of the hedge fund's plea deal approved by the courts.
The winding down of the hedge fund's advisory business, which started returning billions of dollars to investors earlier this year with a criminal investigation gathering pace, would require SAC to install an independent compliance monitor if it continued to trade in the near term, something likely to go against Cohen's micro-management approach to business.
SAC's guilty plea plus a fine, announced by prosecutors yesterday, comes in addition to a $616 million settlement with the US Securities and Exchange Commission.
Manhattan US attorney Preet Bharara said at a press conference that the plea deal sent a message to Wall Street that no institution "is too big to jail."
He dismissed criticism that the plea was something of a disappointment given that Cohen himself had not been charged with any criminal wrongdoing.
Meanwhile, according to Bloomberg, during his first debriefing by two FBI agents on 12 June, 2007, Wall Street insider David Slaine mentioned suspicious trades by two hedge funds - Raj Rajaratnam's Galleon Group LLC and Steven A Cohen's SAC Capital Advisors LP.
Subsequently, with his leads paying off, in October 2009, Galleon began shutting down after Rajaratnam's arrest for insider trading.
According to prosecutors SAC would plead guilty to insider trading, pay a record $1.8 billion and close the fund to outside investors.
Rajaratnam and Cohen would still have been active today had Slaine not agreed to cooperate. The first person to cooperate with the government went largely unacknowledged at yesterday's press conference announcing SAC's plea, according to two people familiar with the investigation, Bloomberg reported.
According to April Brooks, special agent in charge of the criminal division, what started with a key cooperator led to thousands of hours of relentless investigative work by a team of FBI agents, uncovering an extensive network trafficking in inside information.
The US crackdown on insider trading over the past seven years had seen Slaine, 54, emerge as one of the most important witnesses ever to share secrets with US agents probing white-collar crime.
His work directly led to the conviction of 12 people and indirectly to a half-dozen others, according to court papers.
Additionally, his leads helped agents build cases against other insiders, some of whom cooperated with prosecutors and involved even more people with finally tally of convictions exceeding 75.