A Manhattan federal court judge on Thursday approved the $1.8 billion settlement of years long federal probe into insider trading at Steve Cohen’s SAC Capital Advisors.
SAC, a former giant in the hedge fund industry now known as Point72, will pay $900 million — the largest insider trading fine ever — to settle a criminal indictment that alleged SAC carried out a 12-year long scheme to manipulate markets.
“These crimes were clearly motivated by greed,” Judge Laura Taylor Swain said from the bench in a packed courtroom, as she approved the deal. “The defendants committed very serious financial crimes that can easily undermine the integrity of our nation’s exchanges.”
SAC pleaded guilty last Nov. 13 to all five securities and wire fraud charges brought in a July 2013 indictment handed up by a grand jury empaneled by Manhattan US Attorney Preet Bharara.
Peter Nussbaum, general counsel to SAC, said, “We accept responsibility for the misconduct of our employees.”
“We are paying a significant penalty,” Nussbaum told the judge, saying the guilty plea is a “stain” on the reputation of the firm.
“Today marks the day of reckoning for a fund that was riddled with criminal conduct,” Bharara said in a statement. “SAC fostered pervasive insider trading and failed, as a company, to question or prevent it. So far, this office has successfully convicted eight SAC employees of insider trading, and when so much criminal conduct takes place within one institution, it is appropriate to impose criminal liability on the institution itself.”
The other $900 million will be paid as part of a civil forfeiture judgement in a civil money laundering case. That amount will be partially offset by the roughly $616 million SAC has already paid to the SEC as part of the civil settlement.
The hedge fund — which managed $16 billion at its peak and was once said to account for 10 percent of trading in the stock market — had also agreed to return all investor money and terminate its lucrative investment advisory business.
The name change to Point72 reflects its new business as a so-called family office managing only Cohen’s massive wealth — said to be between $9 billion and $10 billion.
Outside the courtroom following the hearing, the years of tension and pressure seemed to quickly evaporate from Nussbaum’s face as he smiled and appeared lighthearted with his colleagues.
However, the embattled Stamford, Conn., may not be completely out of the woods — at least as far as its traders are concerned.
The US Attorney’s office is still investigating insider trading in the hedge fund industry — and the settlement gave no trader, inside or outside SAC, immunity from prosecution.