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There is a break in the dark clouds hanging over Steve Cohen’s hedge-fund empire.
Cohen’s SAC Capital Advisors agreed to pay nearly $616 million — including a record fine — to settle two separate insider-trading cases brought by the Securities and Exchange Commission.
In both instances, SAC neither admitted nor denied wrongoing.
The settlement doesn’t preclude the SEC from bringing an action against Cohen, a top hedge-fund manager and renowned art collector.
Federal prosecutors are also investigating and could bring charges against the firm or individuals.
Still, the agreement removes some of the uncertainty that prompted nervous investors to pull $1.7 billion from the $15 billion hedge-fund firm this year.
“I think it will put many investors’ minds at ease, but it’s hard to predict whether everyone will be fully satisfied,” said hedge-fund expert Steve Nadel with Seward & Kissel.
SAC affiliate CR Intrinsic agreed to cough up a record $602 million — the biggest payment ever in an insider-trading case — to settle allegations that a former portfolio manager traded illegally in two drug stocks.
The settlement ranks as the third-largest overall after AIG’s $800 million deal with the SEC in 2006 and WorldCom’s $750 million agreement in 2003.
“We can’t tolerate a market rigged for the benefit of insiders and their cronies,” said George Canellos, the SEC’s head of enforcement.
Another SAC unit, Sigma Capital, yesterday agreed to pay $14 million to settle charges of insider trading in shares of Dell and Nvidia.
In the CR Intrinsic case, former portfolio manager Mathew Martoma, who still faces criminal and civil charges, is accused of netting the firm $276 million through an insider-trading scheme involving a clinical trial for an Alzheimer’s drug. Martoma is scheduled to go to trial as early as this year.
The SEC said the settlement resolves a so-called Wells notice it issued to SAC in November, warning the firm that it could be sued over the Martoma trades. The notice prompted fears the firm could be hit with a protracted legal battle.
The deal removes some of that overhang — but not all of it.
Canellos didn’t rule out the potential for action against individuals at SAC. Cohen was not named as a defendant in either case.
“Both investigations are pending, so it is possible there could be additional charges in seither one of these cases,” Canellos said.
“Steve Cohen has not been charged with any wrongdoing and has done nothing wrong,” an SAC spokesman said.
SAC is “happy to put the Elan and Dell matters with the SEC behind us. This settlement is a substantial step toward resolving all outstanding regulatory matters and allows the firm to move forward with confidence,” the spokesman said.
The Sigma case that SAC also settled for $14 million involves former portfolio manager Jon Horvath, who pleaded guilty last year and is cooperating with investigators in a pending case against his former boss at Sigma, Michael Steinberg.