Wall St institution SAC Capitol Advisors charged with insider trading by US authorities

26 July 2013

Criminal charges have been filed against the US hedge fund SAC Capital Advisors, one of Wall Street’s most successful firms, calling SAC “a veritable magnet of market cheaters”.

According to the allegations, the firm and its units permitted a ‘systematic’ insider trading scheme to unfold from 1999 to 2010. The activity generated hundreds of millions of dollars in profit for SAC and its founder and owner, the billionaire Steven Cohen, who developed the firm into one of Wall Street’s biggest players over the past two decades.

Preet Bharara, the US attorney for the Southern District of New York, said that the scheme at the firm was “substantial, pervasive and on a scale without known precedent in the history of hedge funds.”

Although Cohen himself was not charged, the 41-page indictment against the firm states that he “fostered a culture that focused on not discussing inside information too openly, rather than not seeking or trading on such information in the first place.”

Earlier this month the Securities and Exchange Commission (SEC), which imposed a US$600m fine on SAC back in March, filed a civil action against the firm’s owner, which accused him of failing to adequately supervise his employees.

The SEC charges by accuse the Stamford, Connecticut-based fund with wire fraud and four counts of securities fraud that amount to “hundreds of millions” made illegally over a decade, according to the filing, while papers filed in Manhattan federal court seek forfeiture of “any and all” assets still owned by SAC.

The criminal indictment lists eight former SAC employees who the US government said engaged in misconduct while at the hedge fund; six of them have already pleaded guilty to individual criminal charges, and are expected to testify in a trial against SAC.

The inevitable questions about a lack of automated reporting and technological oversight will no doubt be raised by regulators and commentators but as ever in these cases if human beings are set upon malfeasance then there is very little that technology can do about it.

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