Nearly three years ago, before anyone had heard of expert networks, before the SEC had brought any major enforcement action against any hedge fund and long before anyone had to gall to accuse SAC of insider trading, Zero Hedge started a series of posts commencing with "Is The SEC's Insider Trading Case Implicating FrontPoint A Sting Operation Aimed At S.A.C. Capital?" exposing the fraudulent transactions of Steve Cohne's hedge fund despite fears of violent legal reprisals. We are delighted to inform our readers that this particular chapter is now over: the WSJ has just reported that SAC will plead guilty to securities fraud, pay a final $1.2 billion penalty (still a tiny sum compared to all the ill-gotten gains by Steve Cohen over the years), and most importantly, end the fund's management of outside money.
SAC Capital Advisors LP will plead guilty to securities fraud as part of a landmark criminal insider-trading settlement with federal prosecutors set to be announced by next week, people familiar with the discussions said.
The exact timing of the pact isn't set, and if final details are ironed out quickly, it could still be unveiled by the end of this week, these people said.
SAC, run by Wall Street titan Steven A. Cohen, also will agree to stop managing outside money and pay the government criminal penalties of about $1.2 billion, according to these people—which would be the largest-ever insider-trading penalty.
A spokeswoman for the Manhattan U.S. attorney's office, Jennifer Queliz, declined to comment, as did SAC spokesman Jonathan Gasthalter, Federal Bureau of Investigation spokesman J. Peter Donald and SEC spokeswoman Judy Burns.
After any settlement is approved, Mr. Cohen would remain under criminal investigation, though no charges are expected against him barring unexpected developments in the probe, the people said.
And since in the hedge fund world the bulk of "retained earnings" comes not from capital appreciation, manipulated, centrally-planned markets or not, but from charging outside investors the exorbitant privilege of 2 and 20 or, in SAC's case 3 and 50, the Steve Cohen era is now effectively over.