Market Overview

Has SAC Capital Successfully Weathered The Insider Trading Storm?


According to a Reuters special report, that seems to be the case.

Steven Cohen's $13 billion hedge fund wasted no time in responding to the insider trading charges against two former employees, Donald Longueuil and Noah Freeman.

SAC Capital's clients are giving the fund the benefit of the doubt. Reuters spoke to several investment fund officials who said that while insider trading charges are unnerving, “it's not enough to prompt them to pull money” from SAC Capital.

U.S. authorities have spent at least four years trying to find evidence of wrongful trading at SAC Capital, but Reuters reports that people inside and outside of the fund are wondering if they will “come up as empty-handed as Captain Ahab did in his hunt for the great white whale Moby Dick.”

Reuters further spoke with nearly two-dozen former SAC Capital employees, investors, money managers, defense lawyers and prosecutors, who collectively gave the sense that federal authorities are fighting “last year's battle” in focusing on Cohen and his associates.

According to the aforementioned people that Reuters spoke with, the SAC Capital of 2011 is much different from the SAC Capital of 2001. Ten years ago, the firm was reportedly known for an anything-goes trading culture “that routinely produced spectacular annual returns of 50 percent or greater,” Reuters said.

“Stevie has been investigated for so long and he is not trading the way he has in the past,” a former prosecutor told Reuters. “I would be shocked if they are able to get anything on him.”

The same cannot be said for some of Cohen's former associates, including David Ganek and Anthony Chiasson, whose Level Global Investors fund was flushed down the toilet after an FBI raid last November.

And that's not the only one. Diamondback Capital Management (another fund that was founded by former SAC Capital traders) was also raided in November. Since that time, Reuters said the fund has had a hard time calming the angst of wary investors. Still, Diamondback execs have vowed to keep the fund in business.


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