SAC Probed By The FBI

Tyler Durden's picture

It is no secret that for many years the SEC has been looking into ways of taking down the most infamous of all "information arbitrage" abusing hedge funds: Steve Cohen's SAC Capital, a quest that has finally accelerated to its inevitable terminal point weeks ago. Of course, had the SEC been reading Zero Hedge, the time to get to that critical civilian conviction would have been far shorter. But where the SEC was demonstrating ongoing incompetence, its peer organization - one with all-importnat criminal enforcement powers - the FBI, was actually several steps ahead, and as Bloomberg reports, is now probing specific trades by SAC, a process which very likely will culminate with criminal charges against one or more people not at CR Intrinsic, but SAC itself. Of course, by several steps ahead, we do mean two years behind Zero Hedge.

Just out from Bloomberg:

SAC Capital Advisors LP’s trading in InterMune Inc. (ITMN) in 2010 as well as trades in Weight Watchers International Inc. (WTW) last year are being investigated by the U.S., a person familiar with the matter said.


SAC bought 1.9 million shares of InterMune in the first quarter of 2010, after holding none in the prior two quarters, and held 10,983 shares at the end of the second quarter of 2010, according to data compiled by Bloomberg.


InterMune’s stock soared in the first week of March after the drugmaker’s experimental medicine for a deadly lung disease was reviewed more favorably by U.S. regulators than analysts had expected. Two months later, the stock slumped after the company’s application for a potential $1-billion-a-year lung treatment was rejected by regulators.

Compare with this Zero Hedge extract from over two years ago:

The plot thickens when we take a comparable look at Intermune.


AS the chart below shows, ITMN is insider trader's dream: two massive moves in the stock - the first one tripling it from $15 to $45, the next one plunging from $45 to $10.



What we do know, again courtesy of SAC's 13F filings, is that the firm which previously had rarely had a concentrated position in ITMN, suddenly went from zero as of December 31, 2010, to almost 2 million shares by the end of Q1... A quarter in which conveniently the stock tripled. Had SAC bought the stock ahead of the favorable press release from March 9 (InterMune's fortunes soared along with its stock to as high as $48 a share after a U.S. Food and Drug Administration advisory panel voted to recommend pirfenidone's approval), it would have made $60 million virtually overnight. Yet SAC's holding were back down to zero by the end of Q2, a quarter in which on May 4, the stock plunged by almost 80% on this adverse piece of news (The agency refused not only refused to go along with the advisory panel vote but told InterMune that another clinical trial would be required before the agency reconsidered the pirfenidone approval decision).

You are welcome, FBI. And just to make your job even easier, here is which other companies we identified over two years ago as smoking guns in the holy grail to finally get a certain someone's head on the metaphorical stick:

Cyberonics is the first company mentioned in the brief narrative above, one which allegedly SAC first shorted, then went long, at some time going all the way back to 2004-5.


A quick glance at the CYBX stock price over the mid 2004-2005 period, together with SAC's disclosed holdings in CYBX, reveals an interesting pattern on the long side (obviously companies don't have to disclosed their short positions in 13F filings).


CYBX P/V chart:



SAC holdings in CYBX:




What is interesting is that not only does the CYBX chart demonstrate that the rabbi was spot on with his stock price recollection, but that SAC may have well acquired a million shares of the company ahead of its February 3 2005 announcement which sent the stock surging from $24 to the mid $40s. As to whether SAC may have shorted CYBX in advance of the August 12, 2004 adverse 8K which cut the stock price in half, that alas, can not be determined by 13F filings. What is obvious is that once the catalytic upside event occurred and SAC made about $20 million on its 1MM shares (assuming of course it bought the CYBX shares in advance of the favorable 8K) SAC never again expressed an interest in CYBX (and in fact its interest in the name had been dwindling over the several prior quarters as can be seen in the chart above).




Looking at Myriad Genetics once again reveals a peculiar trading pattern by SAC. While the transaction in question in MYGN occured after the particular conversation by the rabbi, readers should keep in mind that as noted earlier odd patterns would only emerge in long holding positions: SAC had no obligation to disclosed short bets. And a long term chart of MYGN indicates that the firm sure has had its share of let downs in the past. Yet even just looking at the long side begs a question: as can be seen on the chart below MYGN, announced a cut in guidance on May 5, which led to a trouncing of the stock.


Yet as the 13F summary shows, as of the end of the quarter in which the beating was administered, SAC owned no shares, after owning 700k the quarter just prior...



... and increasing its holdings to 1mm in the quarter after once the stock had not only stabilized but had once again jumped on favorable news.

And, finally, also look at Respironics and Renovis as well. For the full analysis, read here.

You, too, are welcome SEC.

Of course, it remains to be seen if the SEC, whose outgoing Chairman Schapiro, was the epitome of clueless coopted incompetence will do anything with this data, or if her alleged replacement Sallie Crawcheck, who will most certainly convert the SEC into an organization decidedly after only Wall Street's pocketbook, and certainly not justice or the truth, will do much if anything with this information now. They certainly did nothing with it two years ago.

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tony bonn's picture

the fbi isn't probing for charges - let alone convictions - but to know what to cover up and to get its lies straight - the same way it did for gerald ford and the warren commission.

vast-dom's picture

Tyler: the SEC couldn't give a shit about the above -- they are investigating between porn binges and the FBI had all this info for well over a year -- both agencies are keeping up appearances.


the PONZI PLANET spins a bit more on its axis...

GetZeeGold's picture



Of course, by several steps ahead, we do mean two years behind Zero Hedge.


Never gloat......unless you can prove it......then by all means SPIKE THE DAMN BALL!!!


.....and the rest of you bitchez are free to go.

otto skorzeny's picture

the FBI is too busy going  on wild goose chases wasting massive amounts of $ looking for Stacey Peterson(w/ a multi-million $ RV command center) in our local forest preserve to be bothered w/ looking into massive fraud like SAC and Corzine.

dick cheneys ghost's picture

one word.........Angelo Mozillo

GetZeeGold's picture



bothered w/ looking into massive fraud like SAC and Corzine.


What's digging up crap like that gonna get you when you're 90 years old sitting in a wheelchair in the retirement home?

smlbizman's picture

i have watched mary shapiro on a variety of interviews, ...i get the immpresssion she was under lots of pressure from "them" to sit down and shut up...i also think she is itching to tell all what she knows, but she knows she will be suicided and exposed for having porn on her work computor....and please dont take this as an endoresment for just observing...

eatthebanksters's picture

If Corzine is free the none of Obummer's benefactors need worry...

LongSoupLine's picture

Wake me when Cohen is on a pig spit and being roasted with a mixed wood chipper marinade of Shapiro, Gensler, Bernanke, Geithner and BarryO sauce.

Esso's picture

You're gonna be sleepin' for a looooong time brutha.

Pairadimes's picture

We may not get much from our governing agencies, but at least they cost us a fortune.


Desert Irish's picture

Incompetence doesn't come cheap...but at least they protected us from 9/11 and they sure nailed Corzine......oh wait...

Rainman's picture

Lots of humans make 2 million in-n-out long share bets without knowing the outcome. I hear wrist slaps.

booboo's picture

Oy vey, the end is near, the Apache's are eating their own.

Seize Mars's picture

You may have to pay some back taxes, a big fine... ...but there will be no prison.

Desert Irish's picture

Hey they got Martha didn't they!!! fucking ass clowns....

Insideher Trading's picture

This should be legalized.

willwork4food's picture

And the salary of the "honorable" exiting SEC was....?

It's shit like this over the years that tend to prove the real parasites are not necessarily the ones with an EBT card in Kansas but those that use their country's EBT card going out to ***** restaurants.

Keegan11's picture

Plausible deniability. Good luck catching Stevie - he's not stupid, the Feds are. These trades are par for the course with the big hedgies - hard to prove wrongdoing.

Mr. Hudson's picture

"Risk arbitrage" is where bankers use other people's money to loan incredible amounts of cash at very low interest rates to a company that has financial problems, but the company is sitting on excellent, high dollar assets with lots of equity. The bankers loan so much money that the company can never pay it back, so the company goes belly up and the bankers steal the company’s assets for nothing, while the lender's lose their money that was loaned out, and the bankers lose nothing.

: "chart demonstrates that the rabbi was spot on with his stock price recollection"

Who is the "rabbi"?

mjorden's picture

the War on whistleblowers is just ramping up ... dog and pony shows are just that ... 

Catullus's picture

FBI just looked up all of it phone records and emails that they're collecting on everyone everywhere.

Again, the non-crime of using information to allocate millions of other people's money.

Hedgetard55's picture

Who is probing the FBI?

optimator's picture

Homeland Security, CIA, SEC, SRO, GAO, IRS, CID, and last but not least the Justice Deptartment.  They all watch each other, oh, and us too. 

otto skorzeny's picture

the only time the govt gets pissed is when they don't get their cut-kind of like the mob

optimator's picture

Should be a no brainer for the FBI, with all the surveilance tools at their disosal.  May I humbly suggest they also check the trading patterns of Stevie's relatives and close friends, and especially his lawyer(s).

willwork4food's picture

They already did. How else can the goons at the FBI afford a summer home in the Hamptons?


spanish inquisition's picture

Could be just another case of someone doing God's work and he does work in mysterious ways. What are the odds of Stevie admitting no guilt, serving no time and paying a small charitable donation whilst continuing his work in securities and closing the book on his past permitting no future criminal charges? Easy, all you need is friends and resources to make a really big needle...

Everybodys All American's picture

Dendreon, Elan, etc. ... there is a rather big list of SAC plays when it comes to the FDA approval process where insider information is and was worth an extraordinary amount of money.

The Master's picture

All I know is this is extremely bullish for the Hitmen industry. Stevie is about to make it rain

Zombie Investor's picture

I wonder who is going to get left holding the SAC, I mean bag?

WarriorClass's picture

The America we grew up in no longer exists. It has been taken over by an illegitimate government that arbitrarily enforces laws against one group, us, and not another, the oligarchy (i.e. Corzine), wants to force us to pay for the murder of unborn children and support sodomite marriage and unconstitutional wars, while violating every part of the constitution at will.

To pay taxes to this anti-Christ government is to be complicit with it, and suffer it's fate in hell. This is deadly serious.

If you pay taxes, you are guilty.

If your healthcare policy requires you to give $1 to fund abortion or contraception, drop that policy. Do not fund this! It is better to go without health insurance and even medical care than to suffer for eternity in hell.

willwork4food's picture

First two sentences are spot on. Then you devolve into your own cherry-picked bullshit diatribe of reality, which, the last time I checked, is still open for discusson.

Seasmoke's picture

Happy Hanukkah to all Ponzi makers.

W74's picture

Cohen.  What more do you need to know?

Rathmullan's picture

Good investigative journalism Tyler. I hope that the FBI get's to the hedge fund mafia aspect of all of this. Meaning that I doubt that SAC ran ITMN to $45 by itself. Instead, SAC most likely took its position and made it known to a pecking order of other hedge fund that it (the "smart money") had taken such a position and the lemmings followed suit. The last lemmings, of course, lose. But I guess there's no law against being a lemming. 

Freddie's picture

I like the Tylers but the only way anyone is looking at SAC is his protection money costs was increased.   Stevie will pay some fines and his protection money premiums will go up.  The United States of O is far more corrupt than the old USSR.

Watch Scarface when Tony (Al Pacino) is being shaken down by Miami detective Mel Burnstein for protection money.  Mel tells Tony he will need to throw him snacks or phony busts of small timers. Mel will also bust any of Tony's competitors.

Americans are cowards - see the Egyptians fighting O's Al Qeada/Mo Bro Hood puppets. Those people have guts.  Our military, Joint Cheifs, Pentagon, CIA are cowards who allow people's kids in uniform to get killed because they might offend Islam if our kids shoot back.  

Hey Petrayus - I hope that nasty old Islamo poon from "Kelly" the fake Irish named Islamic spy whore was good.  Hopefully she gave you STDs.  Burn in hell cowards.  

Disenchanted's picture



"I hope that nasty old Islamo poon from "Kelly" the fake Irish named Islamic spy whore was good."


It doesn't take much effort to discover that "Jill Kelley" is a Lebanese-American Maronite Catholic. Besides Petraeus was getting the poon from the Paula Kranz Bonewell..err I mean Broadwell character. The woman who ended up with the classified documents she shouldn't have had. Try to keep up Freddie.



Rathmullan's picture

Well said. Americans are cowards. And we're shills for th euro elites such as crustine lagarde (those euro kids' blood is just to precious to spill). Have been shills ever since the shit bucket progressives teddy roosevelt and woody wilson got in to the oval office.

AllWorkedUp's picture

The Americans you mentioned are cowards because they've allowed themselves to be tools of the Zionists.

Iam Yue2's picture

The FBI are finally realising that 95% of the game is centred around webs of insider information.

Joebloinvestor's picture

When does Steve become a "person of interest"?

Rathmullan's picture

The day after jonnie horzine is indicted by a federal grand jury. In other words....NEVER.

Disenchanted's picture



In “The Story of Deep Capture”, we sought to explain the origins of the Deep Capture project by telling the tale of our extensive (and at times, arguably over-the-top) investigation of this network of hedge funds – a network that included SAC Capital (whose founder, Steven Cohen, was investigated by the SEC in the 1980s for trading on inside information given to him by Milken’s shop at Drexel, Burnham), Ziff Brothers, and others. This story was (I admit) exceedingly  long – it demanded its readers’ patience – but it provided plenty of detail of how the network operates.


Among the tactics we cited in that story was the use of so-called “independent” experts – experts who had been hired by hedge funds to ferret out inside information about companies targeted by the hedge funds, or to badmouth companies the hedge funds were selling short. It now appears that the Feds have themselves independently discovered how these “expert networks” actually operate and, as a result, some of these “experts” seem to be looking at possible jail time.


Another tactic we detailed at length was the use of supposedly “independent” financial research shops, such as Gradient Analytics, which were, in fact, in the business of publishing spurious reports for the benefit of their hedge fund clients, which would obtain the reports before they were made public and place trades that would profit from the effect that the reports would have on stock prices. Over and over again we noted how the false information in these reports ended up regurgitated in stories written by a small clique of journalists who appeared to have developed exceedingly close relationships to a small circle of hedge funds, and had come to depend on the hedge funds’ bogus analysis to the exclusion of all dissenting views.


The journalists (some of whom worked for The Wall Street Journal and The New York Times, whose editors must have swallowed hard before publishing this weekend’s stories announcing the imminent indictments) had, like the SEC, been “captured” by the hedge fund managers.


quote from: 


Michael Milken Redux: Insider Trading Indictments on the Horizon for SAC Capital and Others in its Destructive Network Posted on 21 November 2010


also see:

WTF2's picture

Looks like a PR war on insider trading and nothing else.  Without front running and inside info the system would collapse.  Who would trade if they did not think they had an edge?

Herkimer Jerkimer's picture






As my 83 year old mudda would say, and she knows a liar when she hears'em! Trust ME!