Federal prosecutors took a double-barreled approach against hedge fund billionaire Steven A. Cohen on Thursday, unveiling criminal fraud charges against his SAC Capital Advisors LP and a separate civil case seeking to freeze assets and money laundering penalties.
The actions cap a seven-year probe, and could imperil the future of SAC, a roughly $15 billion hedge fund that has posted some of the best returns in its industry and established Cohen, 57, as one of his generation's best traders.
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Cohen was not personally charged, but the very rare move by the U.S. Department of Justice could end his career managing outside money, and suggests prosecutors and the FBI found a pervasiveness of wrongdoing at SAC.
SAC representatives were not immediately available for comment.
Many Wall Street firms that lend money to and trade with SAC are likely to stop because of the criminal case, although the firm might still be able to operate because more than half of its assets belong to Cohen and employees.
The indictment in U.S. District Court in New York accused SAC and various affiliates of four criminal counts of securities fraud and one count of wire fraud.
Cohen had been charged last week in a related civil case brought by the U.S. Securities and Exchange Commission, and said he would fight those charges.
The indictment accused SAC of "systematic insider trading" that enabled it to generate hundreds of millions of dollars of illegal profits and avoided losses.
It said that the scheme ran from roughly 1999 to 2010, and was designed to boost SAC's returns and fees. Cohen charges among the highest fees in the hedge fund industry.
The government said SAC encouraged workers to relentlessly pursue an "information edge" that overwhelmed the firm's "limited" compliance systems.
"There was no meaningful commitment to ensure that such 'edge' came from legitimate research and not inside information," the indictment said. "The predictable and foreseeable result ... was systematic insider trading."
The criminal case is U.S. v. SAC Capital Advisors LP, U.S. District Court, Southern District of New York, No. 13-cr-00541. The civil case is U.S. v. SAC Capital Advisors LP in the same court, No. 13-05182.
This article is by Emily Flitter, Lauren Tara LaCapra, Jonathan Stempel, Katya Wachtel and Svea Herbst-Bayliss of Reuters.
