STAMFORD, Conn. -- Insider trading charges were unsealed Thursday against four companies that are part of the Stamford-based SAC Capitol hedge fund, the U.S. attorney's office in the southern district of New York announced on its website.
The white-collar criminal federal charges are against SAC Capital Advisors, SAC Capital Advisors, Intrinsic Investors and Sigma Capital Management. The hedge fund is operated by embattled billionaire Steven A. Cohen of Greenwich.
“A company reaps what it sows, and as alleged, SAC seeded itself with corrupt traders, empowered to engage in criminal acts by a culture that looked the other way despite red flags all around," Manhattan U.S. Attorney Preet Bharara said in a statement. "SAC deliberately encouraged the no-holds-barred pursuit of an ‘edge’ that literally carried it over the edge into corporate criminality.
"Companies, like individuals, need to be held to account and need to be deterred from becoming dens of corruption. To all those who run companies and value their enterprises, but pay attention only to the money their employees make and not how they make it, today’s indictment hopefully gets your attention.”
Charges were also unsealed against Richard Lee, a portfolio manager employed by SAC Capital LP who pleaded guilty on Tuesday before U.S. District Judge Paul G. Gardephe, to conspiracy and securities fraud charges in connection with his work there. He faces a maximum penalty of 20 years in prison for the securities fraud charge and five years in prison for the conspiracy charge. He also faces a maximum fine of $5 million for the securities fraud charge and $250,000 or twice the gross gain or loss derived from the offense on the conspiracy charge.
The SAC Companies are charged with criminal responsibility for insider trading offenses. These alleged offenses were committed by numerous employees, occurred over the span of more than a decade, and involved the securities of more than 20 publicly traded companies across multiple sectors of the economy. It is charged that the acts of these employees were made possible by institutional practices that encouraged the widespread solicitation and use of inside information. This activity allegedly resulted in hundreds of millions of dollars in illegal profits and avoided losses at the expense of members of the investing public. The SAC Companies are expected to be arraigned Friday at 10 a.m. before U.S. District Judge Laura Taylor Swain.
FBI Assistant Director-in-Charge George Venizelos said: “Our aim all along has been to root out the wrongdoers, and send a message to anyone else inclined to break the law. If your information ‘edge’ is inside information, you can’t trade on it.”