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SAC Capital pleads guilty to insider trading and agrees to pay record $1.8bn fine

SAC Capital, founded by the billionaire investor and art collector Steve Cohen, has agreed to plead guilty and pay fines totalling $1.8bn to resolve charges stemming from a rare insider trading case brought by US prosecutors.

The terms of the deal were outlined by Preet Bharara, the aggressive US Attorney for the Southern District of New York, in documents submitted to district court judges where he said the penalty “is - to the government’s knowledge - the largest financial penalty for insider trading offenses.”

“The SAC entity defendants,” he added, “will also be required to terminate their investment advisory business, effectively closing the affiliated SAC hedge funds to outside investors.”

The plea agreement follows a July indictment when prosecutors alleged that insider trading at the firm “was substantial, pervasive and on a scale without known precedent in the hedge fund industry.”

The allegations, made against SAC and not Mr Cohen, marked a low-point for the billionaire founder of the business, whose personal net worth is estimated by Forbes magazine to be around $9.4bn.

Ahead of the criminal charges against SAC, a business which at the height of its powers boasted funds of around $14bn, Mr Cohen was subject to a separate administrative action by regulators alleging that he had failed to supervise certain employees. T

he agreement announced does not resolve that action. The plea agreement is also subject to court approval.

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The US Attorney’s Office said the $1.8bn penalty comprises of $900m in the criminal case and a $900m forfeiture judgement in a civil money laundering and forfeiture action that brought alongside the criminal case.

A spokesman for SAC Capital, , which was founded by Mr Cohen, a former Wall Street trader, in 1992, said: “We take responsibility for the handful of men who pleaded guilty and whose conduct gave rise to SAC’s liability. The tiny fraction of wrongdoers does not represent the 3,000 honest men and women who have worked at the firm during the past 21 years.  SAC has never encouraged, promoted or tolerated insider trading.”