Two affiliates of SAC Capital, the giant hedge fund, settled insider trading charges with the Securities and Exchange Commission for $614 million on Friday, in what the agency said was the biggest-ever settlement for such cases.
The settlements spare SAC’s founder, the billionaire Steven A. Cohen, who hasn’t been charged with wrongdoing. Cohen, one of the most successful hedge fund managers in the world, has long been considered a target of federal investigators.
But the settlements represent one of the biggest financial coups by the SEC in insider trading cases yet. The amounts paid by SAC surpass the $400 million that Michael Milken paid to settle charges by the agency in 1990, although adjusted for inflation, Milken’s fine would be $716 million in 2013 dollars.
One affiliate of SAC, CR Intrinsic, agreed to pay $600 million over charges tied to one of its employees, who is accused of trading on illicitly obtained confidential information about the drugmakers Elan and Wyeth.
That employee, Mathew Martoma, still faces both civil charges from the SEC and criminal charges from the Justice Department.
A lawyer for Martoma, Charles Stillman, said in a statement: “SAC’s business decision to settle with the SEC in no way changes the fact that Mathew Martoma is an innocent man. We will never give up our fight for his vindication.”
The other affiliate, Sigma Capital Management, agreed to pay $14 million to settle charges that it engaged in insider trading in the stocks of computer giant Dell Corp. and computer chip maker Nvidia Corp.
SAC’s management company will pay the settlements, meaning that investors of the hedge fund aren’t on the hook.
The settlements, especially that of CR Intrinsic, represent more successes by the federal government in its campaign against insider trading.
“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,” George Canellos, the acting director of the SEC’s enforcement division, said in a statement.