CR Intrinsic, the hedge fund offshoot of Steven A. Cohen’s Greenwich-based behemoth, SAC Capital, has settled with the SEC over insider trading allegations, paying some $600 million to make the charges go away without admitting or denying them. It’s the largest insider trading settlement in history, according to the SEC, and a black mark on SAC’s already-sullied reputation. And $600 million is a big chunk of money, even for a firm like SAC Capital. (For comparison’s sake, Goldman Sachs paid only $550 million to settle the Abacus case.) Yet nobody sounds happier than Cohen himself.
“We are happy to put the [insider trading] matters with the SEC behind us,” a spokesman for the firm e-mailed shortly after the announcement.
The CR Intrinsic case, the biggest by far of the two settled today, was never really about Mathew Martoma, the dopey hedge fund manager who traded shares of a couple of pharmaceutical companies based on inside information he got from his doctor friend. It was always about law enforcers trying to use what they had against Martoma to flip him on Cohen, who has long been the real target of the Justice Department’s insider trading investigation. The fact that Martoma has settled instead of cooperating likely means that the Feds have given up on getting him to flip on Cohen and decided to try to squeeze out a meaningful financial penalty instead.
The SEC settlement with CR Intrinsic doesn’t mean that Martoma and Cohen are off the hook — the SEC and Justice Department will still continue their individual cases against Martoma, and neither agency is prevented from going after Cohen in the future by the terms of the settlement.
Still, it’s a better outcome for this particular part of the case than Cohen likely expected. He now gets to deal with an SEC that feels relatively satisfied with the penalty its gotten, and might be dissuaded from continuing to chase him quite as hard, at a cheaper price than he could otherwise have paid. No wonder he’s smiling.