Prosecutors indicted billionaire Steven A. Cohen's hedge fund for insider trading, a rare move that could end the career of one of Wall Street's most successful investors and trigger a fundamental change in how traders try to gain an edge over rivals.
The government accused SAC Capital Advisors LP of presiding over a culture where employees flouted the law and were encouraged to tap their personal networks of contacts for inside information about publicly traded companies.
The result was “insider trading that was substantial, pervasive and on a scale without known precedent in the hedge fund industry,” the indictment said.
While not personally charged criminally, Cohen joins junk bond financier Michael Milken and Galleon Group hedge fund founder Raj Rajaratnam among prominent Wall Street executives linked to insider trading.
The indictment filed by the U.S. Department of Justice against SAC, together with a related civil case seeking forfeitures and money laundering penalties, imperils the future of the roughly $15 billion hedge fund.
It also may end Cohen’s career of managing outside money, where he generated some of the hedge fund industry’s best returns and became one of the foremost traders of his generation.
SAC said in a statement it has no plans to shut down. “SAC has never encouraged, promoted or tolerated insider trading and takes its compliance and management obligations seriously,” it said.