Is This the End of Steven Cohen’s Insider Trading Battle?

Steven Cohen insider trading: It’s no secret that Steven Cohen and SAC Capital are going through a rough patch, mainly because of the insider trading lawsuit initiated by the Securities and Exchange Commission earlier in July. Now, federal prosecutors, with U.S. attorney Preet Bharara in front, demand that the fund plead guilty and pay a $2 billion fine, according to the New York Times’ DealBook. Cohen now has a couple of weeks to reach a decision; a rejection could result in an even higher fine further down the road.

Steven Cohen

Aside from insider trading, prosecutors also accused SAC of “mixing its illegally obtained insider-trading profits with the rest of its money, thus tainting all of its funds,” a DealBook source stated. The government, consequently, now wants to prosecute all of the money held by SAC. After managing around $15 billion at the beginning of 2013, now almost all outsiders have requested their investments back.

If Cohen agrees to pay the fine, he will still have a sizable chunk of assets within the SAC Capital structure.

In July, the SEC initiated charges against Cohen for failing to supervise two senior employees who allegedly engaged in insider trading. SAC and its affiliate, CR Intrinsic, held long positions in two publicly traded companies, Elan Corporation, plc (ADR) (NYSE:ELN) and Wyeth Limited (NSE:WYETH), which reportedly collaborated on a clinical trial of a drug used to treat Alzheimer’s.

In 2008, another portfolio manager of SAC disclosed to Cohen information regarding the financial results of Dell Inc. (NASDAQ:DELL), which it owned shares of at the time. According to the received information, the gross profit margin range of Dell would be below what analysts forecasted, which could have led to the decline of Dell’s stock. After receiving the news, Cohen sold his entire $11 million stake held in Dell.

Disclosure: none