Vesna Harasic

On November 8th, 2013, billionaire Steven A. Cohen’s Connecticut-based hedge fund, SAC Capital Advisors (“SAC”), pled guilty to criminal fraud charges, after allowing—if not facilitating—insider trading for over a decade.[1]  SAC cut a deal with the government in the U.S. District Court in New York, in which it has agreed to pay $900 million in penalties to resolve this criminal case.[2]  SAC’s general counsel entered the guilty plea on four counts of securities fraud and one count of wire fraud.[3]  In addition, six former SAC employees have faced similar criminal charges based on their individual involvement in the case.[4]  Despite SAC’s acceptance of the plea, however, District Judge Laura Swain has already stated that she will not accept the plea until she reads the government’s pre-sentencing report.[5]

Various opponents of the plea call this plea a “no-admit” plea, arguing fervently that the plea would allow the defendants to “pay off” the misconduct without taking any responsibility for the actions alleged in the indictment.[6]  The prosecutors on the case have already speculated that if the plea is rejected and the case goes to trial, new evidence could arise showing that the misconduct was broader in scope, and went beyond the six individuals already implicated.[7]  Similarly, if the case goes to trial, it could present evidence that the misconduct was facilitated by institutional failures, such as a general lack of compliance and a practice that focused on hiring individuals with inside information.[8]

The Department of Justice’s (“DOJ”) pursuit of the hedge fund has various business and legal implications.  SAC’s indictment represents a huge blow to one of the largest and most successful hedge funds in the country, especially because no major financial firm has ever survived a criminal indictment.  Despite the blow, SAC seems to have beaten the odds by continuing its business.[9]  This demonstrates that the DOJ is pursuing its prosecution strategy carefully, making sure that its actions do not lead to SAC’s eternal downfall.[10]  Furthermore, academics have pointed out that it is very rare for a company—rather than individual employees—to be criminally liable on such charges.[11]  The reason for this turns on the potential impact that a criminal prosecution could have on innocent employees, and other “collateral damage.”[12]

Overall, the legal assaults on SAC—both at the civil and criminal level—demonstrate that the DOJ, as well as judges, are unwilling to shield financial institutions for prolonged employee criminal conduct.  As U.S. Attorney Preet Bharara stated after her most recent hearing in this case, “Financial institutions should know that they are not automatically immune from prosecution, and we will hold companies accountable wherever appropriate.”[13]


[1] See U.S. v. S.A.C. Capital Advisors LP, No. 13-cr-00541 (S.D.N.Y. filed Jul. 25, 2013); Nate Raymond and Joseph Ax, Billionaire’s Hedge Fund SAC Capital Advisors Pleads Guilty to Fraud, NBC News Business (Nov. 8, 2013),

[2] Raymond, supra note 1.

[3] Raymond, supra note 1.

[4] Bob Van Voris, SAC Tipper Aggarwal Pleads Guilty to Securities Fraud, Bloomberg (Nov. 8, 2013),

[5] Raymond, supra note 1.

[6] Raymond, supra note 1.

[7] SAC Capital Pleads Guilty in Insider Trading Case, LA Times (Nov. 8, 2013),

[8] LA Times, supra note 7.

[9] David Benoit, What SAC’s Indictment Means, The Wall Street Journal (Jul. 25, 2013),

[10] Benoit, supra note 9.

[11] Benoit, supra note 9.

[12] Benoit, supra note 9.

[13] Raymond, supra note 1.


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