The Securities and Exchange Commission announced an historic settlement on Friday, when SAC Capital agreed to pay more than $600 million to resolve insider trading charges involving its CR Intrinsic hedge fund unit.
The settlement pertains to trades made in 2008 by former SAC portfolio manager Mathew Martoma in two drug stocks, Elan (ELN) and Wyeth (now part of Pfizer (PFE)). The $600 million sum—the largest ever in an insider trading case—breaks down as $274,972,541 in disgorgement of profits, $51,802,381.22 in prejudgment interest, and $274,972,541 in penalties.
SAC’s Sigma Capital unit also agreed to pay $14 million to settle claims that it engaged in insider trading in tech companies Dell (DELL) and Nvidia (NVDA), facilitated by former Sigma analyst Jon Horvath.
The sums are enormous by SEC standards—larger than the agency’s 2010 settlement with Goldman Sachs (GS) over its Abacus collateralized debt obligation, for example. In other words: a very nice pelt.
“We are happy to put the Elan and Dell matters with the SEC behind us. This settlement is a substantial step toward resolving all outstanding regulatory matters and allows the firm to move forward with confidence, said a SAC spokesman, adding that SAC founder Steven A. Cohen has not been charged or sued. “We are committed to continuing to maintain a first-rate compliance effort woven into the fabric of the firm.”
The development indeed puts SAC’s civil troubles pertaining to the Elan and Dell trades behind it. The related Martoma criminal case continues, however, as SAC-watchers wait to see what happens next.