SAC Trades Resemble Those Feds Call Insider Trading

Feb 18 2011 | 12:04pm ET

Steven A. Cohen’s hedge fund, SAC Capital Advisors, reported almost tripling its stake in Hilton Hotels three days before Blackstone group announced its 2007 buyout of the company, according to Bloomberg.

The news agency asked New York Law School associate professor Houman Shadab to review SAC’s holdings in stocks that have been identified by prosecutors as subjects of insider leaks.

The results show the Hilton trade was one of at least 11 occasions on which SAC traded stocks near the time of what prosecutors are calling insider trading in the same shares by other funds.

“While the trades by themselves don’t prove insider trading or fraud, they are consistent with patterns federal investigators are examining based on trading of nonpublic information,” Shadab told Bloomberg.

Prosecutors subpoenaed SAC in November, but have not accused the company or any current employees of wrongdoing.

In the case of the Hilton shares, the stock soared 26% on the trading day following the July Blackstone announcement. SAC reported liquidating 99% of its stake by that September 30. Federal prosecutors allege Galleon Group co-founder Raj Rajaratnam's acquisition of Hilton shares on the day the Blackstone deal became public was based on an illegal insider tip.

SAC's Hilton buy was disclosed in a Securities and Exchange Commission filing.

Two former SAC portfolio managers, Noah Freeman and Donald Longueuil, are among the four hedge fund employees charged with insider trading in the Justice Department's massive investigation.

SAC released a statement on February 8 saying it was “outraged” by the alleged “egregious violations of our ethical standards” by Freeman and Longueuil. The two left SAC in 2010 “due to poor performance.” The government alleges their illegal conduct took place between 2006 and 2010.


In Depth

PAAMCO: Will Inflation Deflate the Asset Bubble?

Jan 30 2018 | 9:49pm ET

As the U.S. shifts from monetary stimulus to fiscal stimulus, market pricing should...


CFA Institute To Add Computer Science To Exam Curriculum

May 24 2017 | 9:25pm ET

Starting in 2019, financial industry executives sitting for the coveted Chartered...

Guest Contributor

Boost Hedge Fund Marketing ROI By Raising Your ROO

Feb 14 2018 | 9:57pm ET

Tasked with delivering returns on client capital, a common dilemma for many alternative...


FINalternatives Trending

From the current issue of