The recent financial crisis has led to many investigations of instances of malfeasance including the charge of insider-trading that has engulfed Raj Rajaratnams Galleon Group. Recently, several sources close to the investigation revealed that Choo Beng Lee, who is cooperating with authorities, admitted that his illicit trades began at SAC Capital in 1994. This revelation has far reaching consequences which include ensnaring another man considered to be a Wall Street darling as well as one of the biggest names in the hedge fund business- billionaire and SAC founder- Steven A. Cohen.
SAC is a multi-strategy, private asset management firm founded by Steven A. Cohen in 1992 with 9 employees and $25 million in assets under management. SAC's initial investment style was "trading" oriented. However, they have evolved into a multi-strategy, multi-disciplinary, investment management firm emphasizing rigorous research and risk management practices. SAC's investment strategies include, but are not limited to: Fundamental and Technical Long/Short Equity Portfolios, Global Quantitative Strategies, Fixed Income and Credit, Global Macro Strategies, Convertible Bonds, and Emerging Markets.
Lee has pleaded guilty to insider-trading charges in along with 19 others. According to his recently released cooperation agreement, he acknowledged that his illicit trading has been going on for over 15 years-since 1994,including while the entire decade he was working at SAC. In return for helping the government, Lee won’t be further prosecuted for any insider trading he may have committed at SAC, which oversees $14 billion, or at his next two employers, as long as he has disclosed the crimes, according to his Oct. 8 plea agreement. Although no one at the Stamford, Conn.-based hedge fund have been accused of any wrongdoing, authorities will certainly be searching further to see who knew what and very likely will have many questions for Cohen himself.
Investigators are expected to examine transactions at SAC, the Wall Street Journal reported on Nov. 7, citing people familiar with the matter. Cohen declined to rehire Lee because he was suspicious about the abrupt closing of San Jose, California-based Spherix, the newspaper said. Spherix Capital LLC, which Lee started in 2007 with Ali Far, closed in March after returning about 10 percent in 2009. Before Spherix, Lee worked for about three years at Stratix Asset Management LLC, a defunct hedge-fund firm in New York run by two former SAC traders.
The SEC has been quite vigilant in their investigation and have made it clear that they will pursue the case, no matter how long it takes or where it may lead. According to reports clients of the firm are being advised that SAC has reviewed its buying and selling of stocks cited in the Galleon Group LLC insider-trading cases and has found nothing suspicious. In addition, it is believed no subpoenas have been served as of yet, but cannot be ruled out as the investigation
is ongoing.
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