(NEW YORK) — In the biggest indictment of a financial firm since auditor Arthur Andersen was charged in 2002, criminal allegations were brought Thursday against SAC Capital Advisors LP for alleged insider trading over an 11-year period.
SAC is accused of “systemic insider trading” that resulted in “hundreds of millions of dollars of illegal profits and avoided losses at the expense of members of the investing public,” according to a sealed 41-page indictment filed by the U.S. Attorney’s Office for the Southern District of New York.
SAC, based in Stamford, Conn., did not immediately respond to a request for comment.
The charges follow a nearly decade-long investigation into the large and powerful hedge fund run by billionaire Steven A. Cohen, 57.
Cohen is a minority owner of the New York Mets and worth $9.3 billion, the 40th richest person in the country, according to Forbes. A father of seven, Cohen was called a “hedge-fund titan” by Vanity Fair last month.
While Cohen is not charged the government is going after his money. As the complaint notes, the “largest portfolio in existence at SAC Hedge Fund was, at all relevant times, a portfolio managed by the SAC owner himself.” U.S. Attorney Preet Bharara is seeking to force the company to forfeit profits “traceable” to the indictment charges.
The entity itself, rather than individuals, is charged with four counts of securities fraud, a move that could crush the firm and cost its roughly 1,000 employees their jobs.
The hedge fund was founded in 1992 and had over $15 billion of assets under management at its peak, the U.S. Attorney’s Office said in the lawsuit.
Civil charges were brought against Cohen on Friday by the Securities and Exchange Commission. Cohen is accused of allegedly failing to prevent insider trading. A spokesman for the firm had said Cohen would “vigorously” fight the SEC’s charges and those allegations have “no merit.”
The indictment states that between about 1999 and at least through 2010, employees and agents of SAC Capital “obtained material, non-public information” or “inside information” relating to publicly-traded companies and traded on that information to increase its return on investment and increase fees received by the company.
Employees of various rank, including portfolio managers and research analysts, “engaged in a pattern of obtaining inside information from dozens of publicly-traded companies across multiple industry sectors,” according to the indictment. It details how the firm allegedly sought to hire employees who had an “edge” based in part on networks of contacts with employees in particular public companies.
The last time the Justice Department has indicted a large, well-known financial firm of a similar scale was the indictment against accounting company Arthur Andersen in March 2002. The brand damage to Arthur Andersen, indicted for obstruction of justice related to energy and commodities firm Enron, was so severe that the company broke up into other businesses.
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Cristina Alesci Seth Fiegerman and Charles Riley, CNN
Jeff Peterson, Deseret News
Ahiza Garcia, CNN
Ahiza Garcia, CNN