Hedge Fund Pleads Not Guilty To Insider Trading

July 29, 2013

Billionaire investor Steven A. Cohen’s hedge fund pleaded not guilty on Friday to insider trading charges in federal court, as questions also surfaced about the future of SAC Capital’s Bermuda-based reinsurance unit, SAC Re, Reuters reports.

Ratings company, A.M. Best Co., and the Bermuda Monetary Authority said they were monitoring developments one day after U.S. prosecutors charged the hedge fund and various affiliates with four criminal counts of securities fraud and one count of wire fraud, according to the Reuters report.

The US Securities and Exchange Commission [SEC] previously laid charges against hedge fund adviser Steven Cohen for allegedly failing to supervise two senior employees and prevent them from insider trading under his watch.

The SEC’s Division of Enforcement alleges that Cohen received highly suspicious information that should have caused any reasonable hedge fund manager to investigate the basis for trades made by two portfolio managers who reported to him – Mathew Martoma and Michael Steinberg.

A statement from the SEC alleged that Cohen’s hedge funds earned profits and avoided losses of more than $275 million as a result of the alleged illegal trades.

“Hedge fund managers are responsible for exercising appropriate supervision over their employees to ensure that their firms comply with the securities laws,” said Andrew J. Ceresney, Co-Director of the SEC’s Division of Enforcement.

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