Billionaire Cohen to Face SEC Claims After Judge Lifts Stay

  • SEC alleges Cohen failed to supervise SAC Capital employees
  • In-house judge schedules prehearing conference for Dec. 21

After more than two years of waiting to resolve a civil case brought by the U.S. Securities and Exchange Commission, hedge fund billionaire Steve Cohen will face the regulator’s allegations that he failed to supervise two former fund managers over insider trading. The criminal conviction against one of the managers was dropped in October.

An in-house judge for the SEC lifted the stay that has been in place since August 2013 and set Dec. 21 for a prehearing conference, according to a litigation release on Wednesday by the Wall Street regulator. In a letter dated Nov. 30, the Justice Department dropped its request for the SEC to suspend its proceedings against Cohen, the release said. Michael Steinberg, one of the former managers, was exonerated following a court ruling that made prosecuting insider trading more difficult.

With charges abandoned against Steinberg and other defendants, the SEC will be pursuing a weaker case against Cohen than when it first brought its action two years ago. Cohen retreated from managing outside money after SAC was shut down in a 2013 plea deal with the government. The billionaire’s firm, SAC Capital Advisors LP, paid a $1.8 billion penalty and was transformed into a family office called Point72 Asset Management.

SEC officials were seeking a lifetime ban for Cohen on managing outside money when the lawsuit was initially filed in 2013, people familiar with their thinking said at the time. How the SEC decides to proceed may impact how long Cohen remains on the sidelines.

A court ruling in December 2014 forced prosecutors to seek dismissal of several insider trading guilty pleas and verdicts, including two tied to SAC. To be found guilty of insider trading, defendants must know their tips came from someone who not only had a duty to keep the information secret but also received a benefit for leaking it.

Judy Burns, an SEC spokeswoman, didn’t immediately respond to a request for comment.

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