One of the most powerful hedge funds in the US, SAC Capital, on Monday pleaded guilty to criminal insider trading charges and agreed to pay a record fine of $1.8 billion.
The firm all but shuts down, under conditions agreed by it in its guilty plea that keeps its billionaire owner Stephen Cohen out for jail for now, without guarantees.
“As I said four years ago, at the time of our first major insider trading arrests, greed sometimes is not good,” said US attorney Preet Bharara, announcing the agreement in New York.
Indian-born Bharara counted 75 busted defendants, who, he cheekily added, “would likely agree”. Among them is former McKinsey boss Rajat Gupta, another Indian-born.
And billionaire hedge fund owner Raj Rajaratnam, who was himself of Sri Lankan origin but ran a ring of Wall Street fraudsters that included several Indian-borns.
That case had a particularly heavy Indian touch with Bharara’s team of prosecutors working with an SEC team led by Sanjay Wadhwa, another lawyer of Indian origin.
And there is an Indian connection to this SAC case too: Mathew Martoma, a former portfolio manager who was slapped with insider trading charges by Bharara’s team last November.
Martoma -- who was born to Indian parents as Ajai Mathew Mariamdani Thomas -- has pleaded not guilty and his case is coming up for trial in a New York court in January.
That case was just one of the many that US prosecutors lined up against SAC, from 1999 to 2010, which the fund admitted to finally on Monday after years denying them.
Those offenses were committed by numerous SCA employees like Martoma over more than a decade, and involved the securities of more than 20 publicly-traded companies.
Across multiple sectors of the economy. Martoma, for instance, is accused of trading in stocks of a pharmaceutical company that was working on an Alzheimer drug in 2008.
He is alleged to have acquired confidential data on the drug trials on the basis of which SAC unloaded its entire position before the results were announced.
The results were dismal, and the drug maker’s stocks tanked.
But SAC was safe thanks to the insider information allegedly provided by Martoma. SAC owner Cohen knew about this all along, according to email exchanges made public.
“For companies that willfully turn a blind eye, be on notice: how your employees make money is just as important as how much they make,” said George Venizelos, who led the FBI probe.