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SAC Investigated For Insider Trading

Tyler Durden's picture




 

The world's most anticlimactic, yet overexpected, news has finally arrived. Reuters reports that Senator Chuck Grassley is investigating possible insider trading at SAC Capital Advisors LLP. Possible. LOL. And so it begins: "The Financial Industry Regulatory Authority last week provided Senate Judiciary Committee head Charles Grassley with about 20 instances of suspicious trading at the hedge fund, a spokeswoman for the senator confirmed on Saturday. Grassley had asked Finra in April for information on any such trading at Steven Cohen's $13 billion hedge fund...It was not clear if the trades had been referred to the Securities and Exchange Commission's enforcement staff, and authorities have not alleged wrongdoing by SAC or Cohen. Court filings also show prosecutors are investigating trade accounts at SAC, including one tied to Cohen, SAC Capital's founder. SAC representatives and congressional investigators met in Washington on May 10 to discuss possible suspicious trades, according to the Wall Street Journal, which earlier reported Grassley's receipt of information from Finra." So even once it is finally uncovered that Cohen's billions in personal wealth have been allegedly accumulated after years of information arbitrage, and we get yet another confirmation that hedge funds only make money through economies of scale, but mostly size (until the implode), or simple insider trading, we are supposed to remember that Cohen is a great humanitarian at heart, and has spent a few million of his allegedly ill-gotten gains for civic pursuits: "Also at the meeting, SAC Capital's
Washington-based policy adviser Michael Sullivan cited Cohen's
"civic-minded interest" in purchasing a stake in the New York Mets
baseball team, the report said.
" Last but not least, SEC heart SAC because with it gone, liquidity (and volume) on the NYSE would plunge by another 15% (and likely much more) in yet another confirmation that fair and efficient US capital markets are nothing but a farce. "At the meeting, SAC representatives suggested the investigators go easy on the hedge fund, saying it has internal procedures to track down and prevent illegal trading, according to the Wall Street Journal report."

And elsewhere, it is time to call off the Gerson Lehrman IPO as the "expert network" world, first exposed by Zero Hedge two years ago (here, here and here) to be nothing more than an legitimate and organized scheme to trade on inside information, falls apart.

From the CFA Institute blog:

Given the value of one’s reputation to long-term professional
success, many on Wall Street are now reconsidering their association
with expert networks. The New York Times has reported
that both buy- and sell-side firms, including Millennium Partners,
Och-Ziff Capital Management, Credit Suisse, and Morgan Stanley have
either stopped using or are adjusting their policies regarding expert
consultants. According to Integrity Research, “usage by financial clients is reportedly down 40-60%,” leading
one to wonder if additional Wall Street firms will distance themselves
given fallout from the large number of insider-trading indictments
related to expert networks.

It is not just the firms using expert consultants that are beginning
to worry about their reputations. Michael Lynch, a consultant working
through the Gerson Lehrman Group, recently commented on the company’s blog that
he may consider withdrawing his consultant services if the
expert-network industry cannot improve its overall image. Lynch noted
that the hourly rate he earns cannot replace the loss of personal
reputation through guilt by association with those who are simply
peddling inside information.

So with hedge funds now having absolutely no informational advantage to the common person, and even idea dinners being bugger by the SEC, what is the point of giving someone 2 and 20 again? While in the past it was merely a fee to compensate the HF manager for the risk of procuring and trading on inside information, with that avenue now largely shut expect to see substantial flows out of the fast money arena and into plain vanilla funds, coupled with significant hedge fund "consolidation" and "synergies"... Perhaps it is time to short all those SoHo lofts after all?

 

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Sat, 05/21/2011 - 15:08 | 1298438 bugs_
bugs_'s picture

Raj singing

Cohen goin

Sun, 05/22/2011 - 10:05 | 1299902 rsi1
rsi1's picture

"So even once it is finally uncovered that Cohen's billions in personal wealth have been allegedly accumulated after years of information arbitrage, and we get yet another confirmation that hedge funds only make money through economies of scale, but mostly size (until the implode)"

 

Lol, great argument!

 

When you find an honest politician then, will you think all politicians are honest? 

Sat, 05/21/2011 - 15:08 | 1298440 jeff montanye
jeff montanye's picture

nitpick: grassley is ranking member; senate controlled by dems (for how much longer?)

Sat, 05/21/2011 - 15:13 | 1298446 silvertrain
silvertrain's picture

wake me up when there are perp walks..

doj is investigatng jpm for silver manipulation also...

Sat, 05/21/2011 - 15:13 | 1298451 imapopulistnow
imapopulistnow's picture

"lay off on the investigation or I'll turn the Mets into a crappy team....err nevermind."

Sat, 05/21/2011 - 15:58 | 1298467 Widowmaker
Widowmaker's picture

What good is an "investigation" without prosecution? Record fucking-bonuses, and getting relected..

Not shit will come out of any of this rapture -- all bread and circuses, everyone knows there will be no prosecution for anyone in the incorporated fraud abyss.

Here's the joke of the day, "...had been referred to the Securities and Exchange Commission's enforcement staff..."  HA!  In Florida?

Sat, 05/21/2011 - 15:25 | 1298476 SloMoe
SloMoe's picture

"According to Integrity Research, “usage by financial clients is reportedly down 40-60%,”"

 

This can't have anything to do with the recent large drop-off in market volume, can it?

 

No, of course not. Never mind...

Sat, 05/21/2011 - 15:24 | 1298479 apberusdisvet
apberusdisvet's picture

Wake me up when they go after JPM or GS.  YAWN.

WHATSDAMATTER?  Didn't Cohen contribute enough to GOP candidates?  BTW, strange that all Swiss bank accounts are fair game for the IRS; but the Cayman Islands are off limits.  Check out how many trips Congresscritters have made there in the last 10 years.

Sat, 05/21/2011 - 15:34 | 1298499 topcallingtroll
topcallingtroll's picture

I bet cayman financial authorities do the governments bidding and get special treatment.

Sat, 05/21/2011 - 15:31 | 1298484 Problem Is
Problem Is's picture

Don't Tell Me, Let Me Guess:
Grassley gets campaign bribes from Goldman...

And Levin gets campaign bribes from SAC...

'Tis The Season
Or Levin wants campaign bribes from Goldman...

And Grassley wants campaign bribes from SAC...

Sat, 05/21/2011 - 15:44 | 1298512 buzlightening
buzlightening's picture

Who isn't insider trading in too big to fail banks in bed with the SINate/CONgress.  Who can be prosecuted?  Someone caught in the lint trap of US dead head fed money laundering outside the world power brokers.  With foreclosure gate and properties being sold 10-15 times over on credit default obligations; who's holding the original note?  unencumbered gold to finance rise in debt limit is ridiculous.  You gotta know it's encumbered/mortgaged 20-50 times to the highest bidder who hasn't a clue on how to get their hands on it physically!! Muni's in trouble! States budgets evaporating and feds probably mortgaged the states off to highest bidder many times over as in neoCONoplian monopoly BK. You gotta know there's little safe haven out there beyond your own self sufficiency plan to survive lawless crooks protected by corrupted judicery throughout a rotting financial system destine to collapse.  It's a total infest parasitical cluster flock near having eatin through the host of AmeriCON'd.  How much longer does the stench of rotting decay of a debt based paper fiat system last? I don't know?   I do know the only strong dollar policy is a strong smelling one ready for the garbage heap. My nose was burning years ago!

Sat, 05/21/2011 - 15:53 | 1298530 dick cheneys ghost
dick cheneys ghost's picture

This country is corrupt to the core............join the fastest growing economy in the world................the underground economy.........no taxes, no laws........you can act just like a large multi-national corporation......its wonderful!!!!!

Sat, 05/21/2011 - 16:04 | 1298552 buzlightening
buzlightening's picture

Action cures fear dickless cheney if you don't mind my flush of the turd.  Leave your financial future in the hands of these dead head fed gov goons goping wilder and you just need sit and stavre right now.   Some of AmeriCON'd won't get it until they're waitin in long lines for food stamps. 

Sat, 05/21/2011 - 16:46 | 1298652 ClassicalLib17
ClassicalLib17's picture

I started drinking Makers Mark at 1:00 p.m. central time, today.  I suggest you take a cab if you decide to go out this evening.  That's my plan.

Sat, 05/21/2011 - 15:54 | 1298538 Temporalist
Temporalist's picture

Someone just had a big hole torn in their SAC.

Sat, 05/21/2011 - 15:59 | 1298544 BeerGoggles
BeerGoggles's picture

Is SAC the new name for InTheMoneyStocks? I heard those guys were pumping and dumping small caps like every day.

Sat, 05/21/2011 - 16:19 | 1298580 slewie the pi-rat
slewie the pi-rat's picture

SAC = so many wiretaps, so little time!

we will soon have lurid, connecticut reports of sex with waiters, maids, and cleaning women who gave it up for stock merger tips.  oh, and babysitters, too. 

Sat, 05/21/2011 - 20:40 | 1299215 Yen Cross
Yen Cross's picture

 Spot on as always. I stay out of your way slewie. I respect you!

Sat, 05/21/2011 - 16:41 | 1298635 Hephasteus
Hephasteus's picture

Government trying to seize honest peoples assets aka mortgage gate. check

Government not stopping fraud but actually accelerating it. check

I think we have an imploding empire here. I think this one's got what it takes.

Sat, 05/21/2011 - 16:46 | 1298649 Smiddywesson
Smiddywesson's picture

Did SAC Capital Advisors post a perfect trading quarter like the big banks?  I laugh at these insider trading cases, they are ridiculous next to what the banks are going.

Sat, 05/21/2011 - 17:27 | 1298655 Waterfallsparkles
Waterfallsparkles's picture

I still say that Jim Cramers Action Alerts is a form of front running.  Where he gives subscribers information on when he is going to talk about or tout a Company on his show Mad Money or Stop Trading segment on CNBC.  This is the same as an Analysis giving a select few that pay for when an Analysis is going to upgrade or downgrade a Stock.

I know he says that the information may have been disseminated prior to broadcast but does that excuse front running of his Buy or Sell recommendations? If Analysis give the same disclaimer is it ok for them to tell a select few that pay for their services to know in advance of their recommendations?

And, what about that "Investment Trust" that he has?  Has anyone ever investigated where the Money from that "Trust" goes and how much Cramer gets paid to manage the Trust?

I thought that it was a CNBC rule that the Hosts and Commentators could not own Stocks.  So, why is Cramer allowed to have an interest in any Stock or Company.  If it is a Trust or not?

That is the question.

Sat, 05/21/2011 - 16:59 | 1298689 Bob
Bob's picture

And while we're quaintly thinking about law enforcement, Barry O is asking to extend Robert "Honey Pie" Mueller's stay at the FBI for another 2 years:

http://www.truthout.org/out-frying-pan-and-fire-why-fbi-needs-new-leadership/1305914235

Sat, 05/21/2011 - 17:10 | 1298731 JW n FL
JW n FL's picture

who seeded the most last couple years? can we get a chart of the top 20 fof's and seed people.. TIA

 

so much for.. IBG! UBG!

Sat, 05/21/2011 - 20:05 | 1299155 Yen Cross
Yen Cross's picture

 C I do read your posts, and respect your input!

 

    YEN CROSS

Sat, 05/21/2011 - 17:15 | 1298751 MrBoompi
MrBoompi's picture

Is this what Senators are elected to do? Where's the fucking executive branch?

Sat, 05/21/2011 - 17:19 | 1298755 buzzsaw99
buzzsaw99's picture

QE2 is the biggest insider trading scam going. The real Sack.

Sat, 05/21/2011 - 18:09 | 1298893 swissbene
swissbene's picture

 

disagree with the recurring fatalism in comments.  this is a positive development.

readers here largely expect it... and understand/suspect it is tip of the iceberg.  this is no reason to throw hands up -- quite the opposite.

big problems so need to chip away.  solution will not fall out of the sky and catch everyone by surprise.  billionaire raj was convicted.  nice pipeline of suspected criminals are on deck.  rolling stone article appears to have catalyzed some movement on gs.  much more to do.

nothing-can-be-done attitude is self fulfilling.  it is also an objective of psychological warfare waged by the very parties to whom 'nothing-can-be-done'.

it is the duty of citizens to hold government accountable.  this site is an instructive example.  personally happy for the development and eager for much more.

 

Sat, 05/21/2011 - 19:57 | 1299124 Smokey1
Smokey1's picture

You are fucking dreaming.

Sun, 05/22/2011 - 05:05 | 1299728 swissbene
swissbene's picture

you may be right.  also i do not expect some utopia, but constant defense of value system seems the best option available.

two thoughts:

1. unless the source of corruption is some monolith/deity, actors can be divided.  self interest and power cut both ways.

i predict an avalanche of insider trading convictions.  self interest and collusion are at core of crime - weak links will fess up in exchange for personal benefit.  call it prosecution arbitrage.

play the state government off the federal.  play the banker off the politician.  get creative.

2. this is a confidence game.  

some of these revolutions in 2011 look like the real thing.  arguably citizens in 'developed' countries are equally capable of asserting control.  not saying this should or will happen.  but the option exists.  organize 1% of US population in DC or NY for a couple weeks and mood will change quickly.

personally i have faith in gradual approach... now where the pipe at :)

Sat, 05/21/2011 - 19:04 | 1299018 Downtoolong
Downtoolong's picture

The Financial Industry Regulatory Authority last week provided Senate Judiciary Committee head Charles Grassley with about 20 instances of suspicious trading at the hedge fund.

So, how many instances of suspicious trading at a firm does it take for FINRA (aka The Department of Regulation Prevention) before they proactively alert authorities without solicitation or provocation;  200,.. 2,000…20,000 maybe? What the hell were they waiting for, Mary Shapiro to come back and actually earn her $9 million?

Sat, 05/21/2011 - 19:25 | 1299059 Yen Cross
Yen Cross's picture

 SAC vs LOL. Government Motors vs Linked in.

Sat, 05/21/2011 - 19:27 | 1299061 Seasmoke
Seasmoke's picture

and this is the guy that the Wilpon Ponzi scammers are hoping will bail them out !!!

Sat, 05/21/2011 - 19:52 | 1299117 Smokey1
Smokey1's picture

Fucking joke.

They'll prosecute Cohen at the same time they fix the pervasive bank fraud.

NEVER.

Sat, 05/21/2011 - 20:57 | 1299234 snowball777
snowball777's picture

Give the Senator a "Harumph!" (and slide your check under the door).

Sat, 05/21/2011 - 21:03 | 1299252 dark pools of soros
dark pools of soros's picture

thought it said SEC investigated for insider trading

Sat, 05/21/2011 - 21:36 | 1299310 El Hosel
El Hosel's picture

 ...... Wake me up when the Fed is investigated for market rigging.

 ....... Spank my monkey when a Fed official is held accountable for anything.

 

   Teflon Machine Bitchez

Sun, 05/22/2011 - 01:15 | 1299633 Akrunner907
Akrunner907's picture

Baby needs a new pair of shoes.........can you say Shakedown.

Sun, 05/22/2011 - 03:40 | 1299698 FoieGras
FoieGras's picture

Let me guess. They won't find enough evidence to indict Darth Stevo himself so Cohen will instead sacrifice a couple of senior trader pawns and the matter is resolved.

Sun, 05/22/2011 - 11:08 | 1299985 dizzyfingers
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