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US authorities indict multi-billion dollar hedge fund for insider trading

The US Attorney for the Southern District of New York [official website] on Thursday filed a announced charges [indictment, PDF; press release] against SAC Capital Advisors [corporate website], the hedge fund run by billionaire Steven Cohen [Forbes profile]. Although Cohen was not charged in the indictment, the Securities and Exchange Commission (SEC) [official website] filed a civil action [text, PDF] against Cohen last week accusing him of failing to supervise his employees, alleging that he "fostered a culture that focused on not discussing inside information too openly, rather than not seeking or trading on such information in the first place." Authorities have also filed a civil action seeking forfeiture [text, PDF] of any and all assets of SAC entities which may have been acquired through illicit information trading.

Federal authorities have been cracking down on insider trading. Last week, a court granted summary judgment [opinion, PDF] in favor of the SEC, holding Rajat Gupta liable for the part he played in the Galleon Group insider trading scheme, headed by Raj Rajaratnam [JURIST news archive]. Previously, Rajaratnam's case has been called the largest hedge fund insider trading case in US history, but federal prosecutors portrayed [NYT report] the "rampant insider trading" at SAC as "substantial, pervasive and on a scale without known precedent in the history of hedge funds." Rajaratnam has been sentenced to the longest term ever imposed for insider trading [DOJ press release], 11 years.

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