Two things are interesting about the Dealbook report that SAC Capital is now facing an inquiry about insider trading related to information the fund received from expert networks.
Background: basically, the SEC is examining how SAC used expert networks to see if insider trading might have occurred. Expert networks are at the center of the most recent hedge fund investigations about insider trading. So of course it follows that any fund that had a relationship with one (and according to someone who used to work for one, that includes SAC Capital and essentially everyone) would at least be questioned.
First interesting thing: This investigation brings the tally to four investigations into SAC Capital's trading practices.
SAC's trades in medical tech stocks are also under investigation (by the SEC) and there's also an investigation of Steve Cohen's personal book (by federal prosecutors).
The Senate is breaking off a chunk too. Senator Grassley's request for more information about suspicious trading activity at SAC might not be counted as a serious investigation, because it reviewed charges that SAC had faced in the past, whereas three fresh investigations seem to suggest that wrongdoing might have occurred at SAC Capital recently. But the sheer number of investigations -- 4 in the past year related to insider trading -- is interesting.
And second, that the investigation may have come at the suggestion of his former employees.
Court filings related to the cases of the two former SAC portfolio managers who have pleaded guilty to insider trading, indicate that the government is reviewing trades made in Mr. Cohen’s account at the suggestion of the former employees.
Former employees might have an inside view of the trading practices at SAC, but they might also have an axe to grind with a boss that fired them or other motives.
No matter what, the latest developments in the expert network-related insider trading investigation are evidence that the government is moving forward with the investigations, and that (or at least they seem) to be getting somewhere.
SAC's relationship with a former Primary Global employee, James Fleishman, was revealed after he was charged on Wednesday with engaging in a conspiracy to help Primary Global's hedge fund clients get access to consultants who might pass on confidential information. Fleishman's IMs to SAC Capital (along with Diamondback, Level Global, Balyasny, and Coatue Management) were uncovered in the probe.
(When we wrote in February about how hedge funds go about getting information from expert networks, we quoted an expert network employee who said that he saw hedge funds engage in a widespread use of expert networks in order to connect them with company insiders who might pass along confidential inside information. The process is explained in more detail here.)
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See Also:
- A "Well-Known" SAC Investor Is Getting Out Now Because Of The Government Investigations
- Now SAC Is Being Investigated By The SEC For Insider Trading In A $15 Billion Biotech Takeover
- Here's How Paul Tudor Jones Is Betting On China
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