New York, NY – According to a recent article by Bloomberg News, former SAC Capital Advisors trader, Noah Freeman, told the Federal Bureau of Investigation that he and others at the firm were expected to pass along inside information to the firm’s founder, Steve Cohen, for his own personal trading use.
Providing Tips Part of the Job
Noah Freeman told the FBI, “At SAC Capital, you were expected to provide your trading ideas to Cohen.” According to B.J. Kang, the FBI agent who interviewed Freeman on December 16, 2010, “Freeman and others at SAC Capital understood that providing Cohen with your best trading ideas involved providing Cohen with inside information.
Kang wrote in notes of his meeting with Freeman, “At SAC Capital you were paid a percentage of Cohen’s trade if Cohen placed a trade based on your tip. It was clear to Freeman that to survive at SAC Capital, you had to feed Cohen with trading tips.”
Freeman pleaded guilty to insider trading and testified at the trial of Winifred Jiau that he had traded on material nonpublic information at least 18 times and had informed more than a dozen people about these tips during his employment at SAC and while at his prior firm, Sonar Capital Management LLC. Freeman was also a cooperating witness for the FBI in its insider trading investigation.
Other SAC Staff Caught Up by Feds
During the federal insider trading investigation that has taken place over the past few years, a number of current and former SAC employees have either pleaded guilty or been accused of insider trading.
Besides Freeman, co-conspirator and former SAC analyst Donald Longueuil, and SAC hedge fund manager Richard Choo-Beng Lee both admitted they had either gathered and passed on MNPI or traded on this information while at SAC. SAC veteran Joseph Skowron, was found guilty of insider trading while at hedge fund FrontPoint Partners.
More recently, Jon Horvath, an analyst at SAC’s Sigma Capital Management unit pleaded guilty to insider trading. In addition, SAC also placed Horvath’s former boss, Michael Steinberg on leave last week.
Not Clear Cohen Knew About MNPI
Despite Freeman’s accusations, it is unclear whether Cohen knew that Freeman’s trading ideas included illegal information. Freeman told Kang that he tried to hide his activities from SAC, as well as his secret arrangement to share illegal tips with hedge fund manager Samir Barai, and others accused of insider trading. “SAC had compliance policies and we wouldn’t have been allowed to.”
A spokesman for SAC, Jonathan Gasthalter, noted that Freeman admitted he attempted to hide his illegal activities from the firm. “Mr. Freeman testified under oath that he went to great lengths to hide his illicit activities from SAC by, for example, using code words and communicating off of firm systems,” said the SAC spokesman. “His testimony makes clear that SAC did not condone his activities.”
Steve Cohen has long been considered a prime target of the SEC’s insider trading investigation, though he has never been accused of wrongdoing. Cohen was deposed by the SEC earlier this year, and he has consistently denied any wrongdoing.
For more details on this story, refer to http://www.bloomberg.com/news/2012-10-02/ex-sac-capital-manager-tells-fbi-fund-used-insider-data.html