Wednesday, 29 June 2016
Last updated 18 min ago
Nov 29 2012 | 1:30pm ET
The SAC Capital Advisors trading chief who sold the stocks at the center of the insider-trading case engulfing the firm has been identified as Phillipp Villhauer.
Villhauer is not named in the criminal or civil complaints against former SAC portfolio manager Mathew Martoma, who is accused of earning the hedge fund $276 million trading on confidential information about Alzheimers' drug trials. But he is the person referred to as SAC's "head trader" or "senior trader" in court documents, Bloomberg News reports.
The case against Martoma has now spread to SAC itself, which was informed on the day of his arrest that it was likely to face a Securities and Exchange Commission lawsuit. The regulator is also mulling an extension of that lawsuit to include SAC founder Steven Cohen.
According to the complaints, Cohen instructed the firm's trading chief, now identified as Villhauer, to begin selling off its enormous stake in pharmaceuticals company Elan Corp. Martoma, who had previously pushed for a big bullish bet on the company, had now urged Cohen to sell, allegedly after learning bad news about the drug trials. The complaints do not allege that Cohen knew Martoma's recommendation was based on non-public information.
Cohen told Villhauer to sell its Elan shares "in a way so as to not alert anyone else, inside or outside of the hedge fund." Villhauer reportedly used algorithms and dark pools to accomplish the task.
Villhauer, according to the Federal Bureau of Investigation, later e-mailed Cohen to report that his orders were "executed quietly and effectively over a four-day period through algos and darkpools and booked into two firm accounts that have very limited viewing access. This process clearly stopped leakage of info from either in [or] outside the firm and in my viewpoint saved us some slippage."
Villhauer has not been accused of any wrongdoing in the case, and there is nothing inherently illegal about using algorithms or dark pools. But former federal prosecutor Andrew Frisch tells Bloomberg that he likely soon will be.
"If this trader is not a cooperator, he is or soon will be in the government's crosshairs," Frisch said. "The government will see him as either a potential cooperator against others or as a worthy target by himself."
One of the others that authorities would undoubtedly seek dirt on from Villhauer is Cohen, against whom the government has spent years attempting to build a case. The FBI sought Martoma's help in getting Cohen before his arrest, but he refused to cooperate.