A huge Connecticut-based hedge fund owned by an embattled billionaire is facing insider-trading charges. And a former University of Michigan professor may have played a part.
Federal authorities in New York City announced the criminal charges against SAC Capital Advisors on Thursday. SAC is charged with wire fraud and four counts of securities fraud, but owner Steven Cohen is not charged.
The criminal charges come less the week after Cohen was accused of wrongdoing in a civil case brought by the Securities and Exchange Commission. The SEC alleged he failed to stop insider trading at his firm.
One of the hedge fund portfolio managers indicted for securities fraud allegedly obtained information about a new Alzheimer’s drug from a University of Michigan neurologist in 2008.
Several sources identify the neurologist as Dr. Sidney Gilman.
According to a federal indictment, within 30 minutes of receiving the emailed information labeled “Confidential: Do Not Distribute”, the U of M professor talked with the hedge fund employee about the findings.
Apparently the drug was not panning out. The hedge fund soon after dumped nearly all of it stocks in 2 companies linked to the drug before the information became public.
The feds say thanks to the info the hedge fund made more than quarter billion dollar profit. According to the New York Times, Gilman received more than $100 thousand in consulting fees from SAC.
The former U of M neurologist is listed as a cooperating witness in the federal indictment. Gilman cut a deal with federal prosecutors last year to avoid prosecution. He resigned from the university in November.
Hedge fund billionaire Steven A. Cohen says his company doesn't tolerate insider trading.
An indictment was unsealed in federal court Thursday charging SAC Capital Advisors with wire and securities fraud.
In a statement, SAC Capital says it "has never encouraged, promoted or tolerated insider trading and takes its compliance and management obligations seriously."
It also says employees who broke the law don't "reflect the honesty, integrity and character of the thousands of men and women who have worked at SAC over the past 21 years."