University News

Trustee’s hedge fund settles with SEC

SAC Capital Advisors faced a civil suit for one of five counts of alleged insider trading

By
University News Editor
Monday, March 18, 2013

Corporation trustee’s hedge fund made national news again this weekend with an agreement to pay out a total of $616 million in settlements with the federal government over two cases of alleged insider trading.

Traders connected to SAC Capital Advisors, founded and run by trustee Steven Cohen P’08 P’16, have faced five separate instances of alleged insider trading in the past few years. The Securities and Exchange Commission filed a civil suit directly against the hedge fund for the first time in November. Cohen has not faced any direct charges, but national media outlets have portrayed the SEC as trying to tighten its web around Cohen — unsuccessfully thus far.

The larger settlement, at $602 million, will resolve the most recent case of alleged insider trading. Mathew Martoma, a portfolio manager who formerly worked for an SAC affiliate, was charged last year with acting on illegal expert information about new drug trials by buying and selling stocks in pharmaceutical companies just before the trial results were made public.

SAC also arranged for a $14 million settlement on charges that it had engaged in insider trading surrounding stocks in Dell and other technology companies.

Some said the news indicated that the SEC had been unable to ensnare Cohen in direct charges. Traders who have been previously charged have refused to cooperate with investigations against Cohen. The settlements were “a de facto admission from the SEC that it’s throwing in the towel on its investigation into Cohen,” lawyer Andrew Stoltmann told Fortune magazine.

Martoma denied any wrongdoing, and his lawyers continued to stress his innocence this weekend. “SAC’s business decision to settle with the SEC in no way changes the fact that Mathew Martoma is an innocent man,” one of Martoma’s lawyers told the New York Times’ DealBook.

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