New Word of Insider Tips at SAC Capital

Steven Cohen’s SAC Capital Advisors, one of the biggest and most successful hedge funds, has landed repeatedly in the crosshairs of the federal crackdown on insider trading. Cohen was deposed by the U.S. Securities and Exchange Commission earlier this year about whether he illegally bought and sold stocks using inside information, two people familiar with the matter said in June. U.S. prosecutors said last year they were looking at trading accounts at SAC, including one run by Cohen that draws on the best ideas from the firm’s portfolio managers and analysts.

Some of those ideas apparently came from questionable sources. A former SAC portfolio manager told the FBI that it was “understood” that people assigned to give their best recommendations to Cohen would deliver insider information, according to an agent’s notes of the conversation. The former fund manager, Noah Freeman, pleaded guilty to securities fraud in February 2011 after speaking to FBI agents and federal prosecutors in New York in late 2010. “Freeman and others at SAC Capital understood that providing Cohen with your best trading ideas involved providing Cohen with inside information,” according to a Dec. 16, 2010, memo written by FBI Special Agent B.J. Kang.