SAC Capital, the hedge fund headed by Steve Cohen, would be facing difficulties retaining investors in light of the indictment case filed by the state against the firm, an industry observer noted. Forbes contributor and industry observer Robert Wood said that the indictment had claimed SAC management ignored "indications that trading recommendations were based on Inside Information." Eight former employees were mentioned in the indictment, with six who have already pled guilty to insider trading.
Although the government was after Cohen himself, the head of the hedge fund dodged a bullet by agreeing to pay USD616 million in a settlement deal without admitting to any wrongdoing. Wood, who is also a tax and litigations expert, deduced that the settlement may earn Cohen's firm a tax deduction and him an out-of-jail card.
This is the largest insider trading settlement to date. Michael Milken, the junk bond king of the 1980s came as a close second, with USD600 million in fines and restitution after he pled guilty to securities violations. Another hedge fund giant, Raj Rajaratnam, was ordered to pay a penalty of USD92.8 million, and was sentence to 11 years in prison.
SAC capital was founded by Steve Cohen in 1992. Since then, the company had delivered average annual net returns of 30% to its shareholders.
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