Criminal charges for SAC 'insider trades'

New York

US prosecutors mounted an aggressive legal assault on the giant SAC Capital hedge fund yesterday, alleging in a rare criminal case that insider trading "was substantial, pervasive and on a scale without known precedent in the hedge fund industry".

The action, backed up by a civil complaint seeking forfeiture of assets and calling for money laundering penalties, is the result of a long-running investigation into a business that at the height of its powers managed more than $15bn (£9.8bn) in assets.

Founded by Steve Cohen in 1992, SAC is among the largest and, so far, the most profitable hedge funds in the industry. Mr Cohen is estimated to be worth more than $9bn by Forbes.

But prosecutors allege in a 41-page criminal indictment that underlying that success, employees and agents of the business participated in an expansive insider trading scheme over about 11 years to boost the fund's returns and the fees it drew from investors.

"SAC became over time a vertiable magnet for market cheaters," the US Attorney for the Southern District of New York, Preet Bharara, said.

The allegations and criminal charges were made against the firm, a rare step given the potentially fatal damage such action could inflict on a business.

Mr Cohen was not accused of any wrongdoing. Last week, he was charged in a civil action with failing to supervise certain employees.

Prosecutors said yesterday that SAC and its units "enabled and promoted" the alleged insider trading scheme. They did this, according to the indictment, by hiring employees with access to public company contacts likely to posses insider information, incentivising stock recommendations that had an "edge" over other investors while failing to question the provenance of such tips, and by failing to "employ effective compliance procedures" to prevent insider trading activity.

The outcome was allegedly "systematic insider trading … resulting in hundreds of millions of dollars of illegal profits and avoided losses".

The indictment named a number of SAC-linked individuals accused of obtaining or trading on inside information, including Richard Lee, a former employee who has been accused of obtaining inside information. Earlier this week, Lee pleaded guilty to conspiracy and securities fraud related to his employment at SAC.

Others named include Mathew Martoma, a former SAC manager arrested last year on accusations of illegal trading in pharmaceuticals' shares.

The authorities said Mr Lee was hired by Mr Cohen despite his previously employment at a rival hedge fund – identified only as Hedge Fund A but named in reports as Chicago-based Citadel – where he was "known for being part of … [its] 'insider trading group'."

Citadel yesterday denied any such group existed. Katie Spring, a spokeswoman, said Mr Lee was fired in 2008, although the termination was not related to insider trading. A source alleged he was let go because of the way he managed his records.

SAC last night said it had "never encouraged, promoted or tolerated insider trading". It added:" SAC will continue to operate as we work though these matters."

Arts and Entertainment
Gregg Wallace in Summer's Supermarket Secrets
tv All of this year's 15 contestants have now been named
Sport
The giant banner displayed by Legia Warsaw supporters last night
football Polish side was ejected from Champions League
Arts and Entertainment
Could we see Iain back in the Bake Off tent next week?
tv Contestant teased Newsnight viewers on potential reappearance
News
i100(and it's got nothing to do with the Great British Bake Off)
PROMOTED VIDEO
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
Voices
The Ukip leader has consistently refused to be drawn on where he would mount an attempt to secure a parliamentary seat
voicesNigel Farage: Those who predicted we would lose momentum heading into the 2015 election are going to have to think again
Arts and Entertainment
Cara Delevingne made her acting debut in Anna Karenina in 2012
film Cara Delevingne 'in talks' to star in Zoolander sequel
News
i100
Sport
Mario Balotelli pictured in his Liverpool shirt for the first time
football
Life and Style
tech
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SAS Business Analyst - Credit Risk - Retail Banking

£450 - £500 per day: Orgtel: SAS Business Analyst, London, Banking, Credit Ris...

Project Manager - Pensions

£32000 - £38000 Per Annum Bonus, Life Insurance + Other Benefits: Clearwater P...

KYC Analyst, Birmingham - £200-£250 p/d

£200 - £250 per day + competitive: Orgtel: KYC Analyst, Key Banking Client, Bi...

Test Manager - Banking - Yorkshire - £450 per day

£400 - £500 per day: Orgtel: Test Manager - Banking - West Yorkshire - £400-£5...

Day In a Page

Ukraine crisis: The phoney war is over as Russian troops and armour pour across the border

The phoney war is over

Russian troops and armour pour into Ukraine
Potatoes could be off the menu as crop pests threaten UK

Potatoes could be off the menu as crop pests threaten UK

The world’s entire food system is under attack - and Britain is most at risk, according to a new study
Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

Seoul's plastic surgery industry is booming thanks to the popularity of the K-Pop look
From Mozart to Orson Welles: Creative geniuses who peaked too soon

Creative geniuses who peaked too soon

After the death of Sandy Wilson, 90, who wrote his only hit musical in his twenties, John Walsh wonders what it's like to peak too soon and go on to live a life more ordinary
Caught in the crossfire of a cyber Cold War

Caught in the crossfire of a cyber Cold War

Fears are mounting that Vladimir Putin has instructed hackers to target banks like JP Morgan
Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years

Salomé: A head for seduction

Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years. Now audiences can meet the Biblical femme fatale in two new stage and screen projects
From Bram Stoker to Stanley Kubrick, the British Library's latest exhibition celebrates all things Gothic

British Library celebrates all things Gothic

Forthcoming exhibition Terror and Wonder: The Gothic Imagination will be the UK's largest ever celebration of Gothic literature
The Hard Rock Café's owners are embroiled in a bitter legal dispute - but is the restaurant chain worth fighting for?

Is the Hard Rock Café worth fighting for?

The restaurant chain's owners are currently embroiled in a bitter legal dispute
Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival

In search of Caribbean soul food

Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival
11 best face powders

11 best face powders

Sweep away shiny skin with our pick of the best pressed and loose powder bases
England vs Norway: Roy Hodgson's hands tied by exploding top flight

Roy Hodgson's hands tied by exploding top flight

Lack of Englishmen at leading Premier League clubs leaves manager hamstrung
Angel Di Maria and Cristiano Ronaldo: A tale of two Manchester United No 7s

Di Maria and Ronaldo: A tale of two Manchester United No 7s

They both inherited the iconic shirt at Old Trafford, but the £59.7m new boy is joining a club in a very different state
Israel-Gaza conflict: No victory for Israel despite weeks of death and devastation

Robert Fisk: No victory for Israel despite weeks of devastation

Palestinians have won: they are still in Gaza, and Hamas is still there
Mary Beard writes character reference for Twitter troll who called her a 'slut'

Unlikely friends: Mary Beard and the troll who called her a ‘filthy old slut’

The Cambridge University classicist even wrote the student a character reference
America’s new apartheid: Prosperous white districts are choosing to break away from black cities and go it alone

America’s new apartheid

Prosperous white districts are choosing to break away from black cities and go it alone