NEW YORK Federal authorities announced criminal charges Thursday against SAC Capital, a hedge fund run by the billionaire Steven A. Cohen, an unusually aggressive move that could cripple one of Wall Street's most successful stock trading firms.
In the 41-page indictment, which includes four counts of securities fraud and one count of wire fraud, prosecutors charged SAC and its units with permitting a "systematic" insider trading scheme to unfold between 1999 and 2010, activity that generated hundreds of millions of dollars in profits for the firm. The case seeks to attribute criminal acts of several employees to the company itself, claiming that the fund "enabled and promoted" the illicit behavior.
"When so many people from a single hedge fund have engaged in insider trading, it is not a coincidence," Preet Bharara, the top federal prosecutor in Manhattan, said at a news conference Thursday. "It is instead the predictable product of pervasive institutional failure."
A SAC spokesman argued that "The handful of men who admit they broke the law does not reflect the honesty, integrity and character of the thousands of men and women who have worked at SAC over the past 21 years."
The problems at SAC, according to the indictment, partly stemmed from a breakdown in internal controls and ethics. The indictment cited "an institutional indifference" to wrongdoing that "resulted in insider trading that was substantial, pervasive and on a scale without known precedent in the hedge fund industry."
Without evidence directly linking Cohen to illicit trades, the government stopped short of criminally charging him. But the case is a blow to him all the same. Not only does the firm name bear his initials, but Cohen owns 100 percent of the company he founded with his own money more than two decades ago.
The indictment is also stacked with references to Cohen, though he is identified only as "the SAC owner." In a direct rebuke of Cohen, a 57-year-old collector of art and real estate, the indictment said he "fostered a culture that focused on not discussing inside information too openly, rather than not seeking or trading on such information in the first place."