SAC Capital Advisors may be ready to cut a deal.
Lawyers for the embattled hedge fund told prosecutors last week that firm founder Steven Cohen would like to reach a settlement of the criminal insider-trading charges against SAC, as well as civil charges against him filed by the Securities and Exchange Commission. Until now, there has been no indication that SAC, which has pleaded not guilty and professed its innocence, was interested in a deal.
And any deal would come at a big price: Bloomberg Businessweek reports that a fine of about $1 billion is under discussion. Some sort of restrictions on Cohen, including possibly a bar from the securities industry, are also likely.
SAC was indicted in July; Manhattan U.S. Attorney Preet Bharara called the company "a veritable magnet for market cheaters" and accused it of running an insider-trading scheme for more than a decade, earning "hundreds of millions of dollars" illicitly trading on at least 20 different companies. The government was seeking billions in forfeitures from the firm, which is continuing to operate under a protective order agreed to with prosecutors.
While professing its innocence, SAC has also denied that it plans to substantially reduce its 1,000-strong workforce or give up managing outside capital. The latter decision has already been made for it, however, by investors, who have moved to withdraw substantially all of their money, leaving SAC with about $9 billion—most of it Cohen's. In recent weeks, SAC has laid off marketing and investor-relations staff and is considering a conversion to a family office, which will likely be a key plank of any deal with the government.
Any fine agreed to by SAC would be in addition to the $614 million settlement it struck with the Securities and Exchange Commission in March, to cover allegations stemming from the cases against former SAC portfolio manager Mathew Martoma and former SAC analyst Jon Horvath.