US hedge fund faces insider fine of $1.2bn

A major Wall Street success story is expected to come an end this week when SAC Capital, the hedge fund giant founded by the billionaire trader Steve Cohen, seals a settlement with US prosecutors who earlier this year slapped the business with a rare criminal case.

The $15bn (£9.4bn) fund is reportedly preparing to plead guilty and agree to a fine of up to $1.2bn as it attempts to settle allegations that insider trading at the firm “was substantial, pervasive and on a scale without known precedent in the hedge fund industry.”

SAC, which is among the largest and the most profitable funds in the business, was founded by Mr Cohen in 1992. It has made him a fortune estimated by Forbes magazine to be in the region of $9bn. Most of the money in the fund belongs to Mr Cohen.

Unveiling the indictment in July, the US Attorney for the Southern District of New York, Preet Bharara, sad: “SAC became over time a veritable magnet for market cheaters.” The allegations were made against SAC, not Mr Cohen, who was not accused of any wrongdoing. Shortly before the criminal case was announced, however, he was subject to a separate civil action by regulators charging him with failing to supervise certain employees.

According to a Wall Street Journal report, the firm’s settlement with prosecutors will also see it agree to stop managing money for external clients.