Criminal Case Not Only Legal Problem For SAC

Jul 26 2013 | 11:26am ET

They pale in comparison to the indictment handed down against SAC Capital Advisors yesterday, but the hedge fund is facing other legal headaches.

SAC has been hit with another lawsuit by investors in Elan Corp., one of the pharmaceutical companies whose shares it is accused of trading illegally. And a longtime legal nemesis appears to hope that the criminal allegations against SAC will revive its own claims against the firm.

The new Elan lawsuit files a similar complaint lodged in December. The latest action, filed this week in Manhattan federal court, alleges that SAC's settlement with the SEC over the Elan trading account for just half of its ill-gotten gains. The investors are seeking $686 million.

SAC also faces a similar lawsuit from investors in Wyeth LLC. The hedge fund and former portfolio manager Mathew Martoma are accused of trading in both companies' securities based on confidential information about drug trials provided by a doctor overseeing them.

Meanwhile, Canadian insurer Fairfax Financial Holdings hopes that the indictment for insider-trading—one of the many misdeed Fairfax alleges against SAC—will revive its own lawsuit against the hedge fund.

Fairfax has waged a bitter seven-year battle with SAC and several other prominent hedge funds, notably Exis Capital, Kynikos Associates and Third Point. The insurer alleges that the hedge funds and brokerage Morgan Keegan conspired to drive down its share price. The claims against SAC were dismissed years ago, and the racketeering lawsuit came to an end in September when a New Jersey state court judge junked the remaining claims against Exis and Morgan Keegan.

Michael Bowe, a lawyer for Fairfax, took to the airwaves yesterday to press his client's case. Bowe suggested to Bloomberg TV that Fairfax's case against SAC mirrors "what the indictment says" and claims that the lawsuit launched the investigation into SAC.

"This is of zero surprise to me, my clients, and, I think, most people who are familiar with how SAC has worked over the years," Bowe said.


In Depth

Debunking Conventional Investment Wisdom

Feb 8 2017 | 3:22pm ET

Due diligence in the hedge fund world has long involved some combination of the...

Lifestyle

'Tis the Season: Wall Street Holiday Parties Back In Fashion

Dec 22 2016 | 9:23pm ET

Spending on Wall Street holiday parties has largely returned to pre-2008 levels...

Guest Contributor

iCapital Network: The Trump Effect On Direct Lending

Feb 23 2017 | 4:21pm ET

The arrival of the Trump Administration has raised questions among private debt...