The once high-flying hedge fund SAC Capital was sentenced on criminal fraud charges Thursday under a $1.8 billion deal that prosecutors say included the largest criminal fine ever imposed in an insider trading case. Southern District Judge Laura Taylor Swain (See Profile) formally administered the sentence on Stamford, Conn.-based SAC Capital LP and three related entities based on pleas made by a lawyer for the companies last fall to wire fraud and securities fraud.
The government said in court papers that the majority of money managed by the defendants during a decade-long fraud that began in 1999 belonged to the hedge fund’s billionaire owner and founder, Steven A. Cohen. It noted eight employees have been convicted of insider trading.
“To have eight criminal convictions in a single institution is remarkable,” Assistant U.S. Attorney Antonia Apps told Swain. She said it reflected the “pervasive” nature of insider trading going on in the companies.
Representing the companies, longtime SAC General Counsel Peter Nussbaum told the judge the companies “accept responsibility for the misconduct of our employees.” He said the companies were paying a significant penalty and that the crimes had put a “stain on the reputation” of honest and hardworking employees.
The deal between SAC and the government did not resolve a civil case that the Securities and Exchange Commission brought last July against Cohen. He was accused of failing to prevent insider trading at the company, which he founded in 1992 and which bears his initials. Cohen has disputed the SEC’s allegations. He has not been charged with a crime.