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SAC Agrees To Plead Guilty To Insider Trading

Steven A. Cohen, founder and chairman of SAC Capital Advisors, is interviewed in Las Vegas in 2011.
Steve Marcus
Steven A. Cohen, founder and chairman of SAC Capital Advisors, is interviewed in Las Vegas in 2011.

Reaching a plea deal with federal prosecutors, the hedge fund firm SAC Capital Advisors has agreed to plead guilty to insider trading, pay a $1.8 billion fine and end its investment advisory business.

Reuters reports:

"U.S. prosecutors on Monday filed a letter describing the deal to the judges in a pair of cases - one criminal, the other a civil forfeiture action - against SAC Capital stemming from a massive insider trading investigation. The judges would have to approve the deal."

As Scott reported back in July, federal officials alleged that during a decade starting around 1999, the company, which controlled $15 billion in assets at one point, "solicited nonpublic information and used it to trade stock in publicly traded companies."

Also back in July, the Securities and Exchange Commission charged the fund's billionaire founder Steven A. Cohen of failing to prevent insider trading. Those charges are still pending.

NPR's Jim Zarroli reports that SAC was one of the most prominent hedge funds in the country.

"The company had dozens of portfolios managed by people with ties to different industries," Jim told our Newscast unit. "U.S. officials say they regularly traded stock based on illegally obtained information. Tips were also passed on to Cohen, who used it to trade for his own portfolio."

The charges against Cohen are civil, not criminal.

Update at 4:18 p.m. ET. The Math On The Fine:

The New York Times breaks down the $1.8 billion fine:

"The government, according to people briefed on the matter, initially demanded $1.8 billion in penalties from SAC — $900 million in fines and $900 million in forfeited profits. But SAC's lawyers, the people said, urged the government to deduct from that amount the $616 million the fund has already paid to the S.E.C.

"Prosecutors ultimately agreed. Under the plea deal, SAC would pay $900 million in fines and forfeit an additional $284 million to the government, reflecting the $616 million credit from the S.E.C. payout."

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Eyder Peralta is NPR's East Africa correspondent based in Nairobi, Kenya.