The legal battle surrounding SAC Capital Advisors appears to be ramping up as the U.S. is now considering criminal charges against the embattled hedge fund and has slapped the firm’s founder, Steve Cohen, with a subpoena.
Continue Reading Below
The developments in the long-running insider-trading probe come after SAC warned investors in a Friday letter that its cooperation with the government investigation “is no longer unconditional.”
That disclosure occurred just after the hedge fund met with U.S. prosecutors and received word of interest in the case by a grand jury, sources told FOX Business’s Charlie Gasparino. SAC failed to reach a settlement to end the probe, prompting the letter to investors.
One deal that had been on the table included a “restart” of SAC after a deferred prosecution agreement, allowing the hedge fund to raise money for a new fund, Gasparino reported.
SAC, which has $15 billion in assets, has been ensnarled in wide-ranging investigation into allegations of insider trading that has led to the implication of nine current or former employees.
While Cohen himself hasn’t been implicated directly, the hedge fund chief along with other SAC executives received a subpoena to testify before a grand jury last week, Gasparino reported.
Continue Reading Below
Testimony in front of a grand jury can often precede a formal indictment from prosecutors.
By announcing it may no longer cooperate with the government, Cohen may be signaling a different legal strategy that attempts to avoid self-incrimination.
“Steve is not giving up on his business. We'll have to see how this turns out,” a source told Gasparino.
A representative from SAC didn't immediately respond to a request for comment.
At least some SAC investors appear to be getting worried about the ramped-up insider-trading probe.
Private-equity giant Blackstone Group (BX), the hedge fund's largest outside investor, has made preparation to withdraw $200 million to $300 million from SAC, The Wall Street Journal reported. Blackstone had about $550 million invested in SAC as of March, the paper said.
New York-based Blackstone didn't immediately respond to a request for comment.
Last month SAC reached a $616 million settlement with the Securities and Exchange Commission over charges of improper trading stemming from an insider-trading probe of Mathew Martoma, a former portfolio manager who pled not guilty to insider trading. That settlement awaits approval by a federal judge.
In November Michael Steinberg, the highest SAC exec to face charges, is scheduled to go on trial in a criminal insider-trading case. Prosecutors have said Steinberg acted on inside information to reap $1.4 million in profits through trades in shares of PC maker Dell (DELL) and chip maker Nvidia (NVDA).