Two affiliates of Steven A. Cohen's embattled SAC Capital
Advisors agreed to pay more than $614 million to settle separate
civil insider-trading probes, the Securities and Exchange
Commission said Friday.
One of those affiliates, CR Intrinsic Investors, agreed to pay
more than $600 million to settle a civil lawsuit filed by the SEC
in November, representing the largest settlement ever for
allegations of insider trading, the regulator said.
The settlements come as clients of SAC Capital have moved to
pull $1.7 billion from the hedge-fund firm as federal
insider-trading probes have weighed on the firm.
At least six former employees have been ensnared in the
government's investigation. However, SAC has said the firm and its
founder, Mr. Cohen, have acted appropriately and will cooperate in
the government's probe.
In the Intrinsic case, the SEC alleged that the affiliate traded
on nonpublic information regarding the clinical trial of an
Alzheimer's drug. Mathew Martoma, a former Intrinsic portfolio
manager, is separately facing criminal charges related to the
alleged trades and has denied wrongdoing.
"The historic monetary sanctions against CR Intrinsic and its
affiliates are sharp warning that the SEC will hold hedge fund
advisory firms and their funds accountable when employees break the
law to benefit the firm," said George S. Canellos, acting director
of the SEC's Division of Enforcement.
In a statement, SAC said that the firm was happy to resolve the
matters. "This settlement is a substantial step toward resolving
all outstanding regulatory matters and allows the firm to move
forward with confidence," the firm said. "We are committed to
continuing to maintain a first-rate compliance effort woven into
the fabric of the firm."
"SAC's business decision to settle with the SEC in no way
changes the fact that Mathew Martoma is an innocent man," said
Charles A. Stillman, a lawyer for Mr. Martoma. "We will never give
up our fight for his vindication."
On Friday, Sigma Capital Management, another SAC affiliate, also
agreed to pay nearly $14 million to settle a separate lawsuit by
the SEC, alleging that the firm engaged in insider trading of
shares ahead of the quarterly earnings announcements of Dell Inc.
(DELL) and Nvidia Corp. (NVDA).
The information allegedly was obtained by Jon Horvath, a former
Sigma Capital analyst who pleaded guilty to criminal charges and
agreed to cooperate in the government's probe.
"Sigma Capital's violations of the securities laws were blatant
and recurring," said Sanjay Wadhwa, senior associate director of
the SEC's New York regional office. "The firm obtained key
quarterly earnings information before it was public and exploited
an unfair edge over the rest of the market to reap millions of
dollars in unlawful gains."
-- Michael Rothfeld and Juliet Chung contributed to this
story.
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