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SAC Capital Agrees to Plead Guilty to Insider Trading

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Updated, 8:46 p.m. | "The hedge fund titan Steven A. Cohen sat at the center of his vast trading floor on Monday, buying and selling stocks. In a sign of his enduring influence on Wall Street, he did business with major banks like Goldman Sachs and JPMorgan Chase.

Just last week, Mr. Cohen appeared relaxed courtside at Madison Square Garden while watching the New York Knicks defeat the Milwaukee Bucks in their season opener. And he will soon be closely monitoring the auctions at Sotheby’s and Christie’s, which are selling about $80 million worth of art from his vaunted collection, including two Warhol paintings and a Cy Twombly sculpture.

For the 57-year-old billionaire, it is business as usual.

But on Monday, federal prosecutors announced that Mr. Cohen’s firm, SAC Capital Advisors, had agreed to plead guilty to insider trading violations and pay a record $1.2 billion penalty, becoming the first large Wall Street firm in a generation to confess to criminal conduct. The government has also forced SAC to terminate its business of managing money for outside investors.

Insider trading at SAC was “substantial, pervasive and on a scale without precedent in the history of hedge funds,” said Preet Bharara, the United States attorney in Manhattan. His office has criminally charged eight former SAC employees; six have pleaded guilty.

Mr. Cohen’s apparent nonchalance — even as the firm bearing his initials admitted it was a criminal organization — reflects what is missing from the plea deal. After more than a decade of poring over trading records, interviewing informants and issuing grand jury subpoenas, federal authorities have not been able to build a case against SAC’s billionaire owner.

Without such a case, Mr. Cohen could still be a force on Wall Street, which has long, deep relationships with SAC. With its rapid-fire trading style, the hedge fund has been a top stock-trading client of the major banks, paying them billions of dollars in commissions. The banks have also made big profits extending loans to the fund. On Monday, they all continued to trade with SAC.

According to his friends on Wall Street, Mr. Cohen says that he has done nothing wrong and thinks the government is bent on destroying him and his firm. Mr. Cohen, who owns 100 percent of SAC, has also privately complained that he has to pay more than $1 billion out of his own pocket for the crimes of rogue employees..."

SAC Capital Agrees to Plead Guilty to Insider Trading Dbpix-sac2-tmagArticle

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