On November 4th, 2013, the SEC announced that it would impose a record-setting $1.2 billion fine on SAC Capital Advisors. ((Peter Lattman and Ben Protess, $1.2 Billion Fine for Hedge Fund SAC Capital in Insider Case, N.Y. Times DealBook (Nov. 4, 2013), http://dealbook.nytimes.com/2013/11/04/sac-capital-agrees-to-plead-guilty-to-insider-trading/))The fine stemmed from a multi-year investigation into allegations of insider trading at the hedge fund. ((Id.)) US Attorney Preet Bharara described the insider trading at SAC as “substantial, pervasive and on a scale without precedent in the history of hedge funds.” ((Id.)) SAC pleaded guilty to the charges and in doing so became the first Wall Street firm in many years to have confessed to criminal conduct. While several employees of SAC were individually prosecuted as well, SAC’s founder, Steven Cohen, was able to avoid any blame. ((Id.)) Along with the fine, as a condition of the guilty plea, SAC would no longer be allowed to manage money for outside investors. ((Id.)) While this condition might have been a deathblow for most hedge funds, it was of less consequence for SAC, as of the nearly $15 billion under management, almost $10 billion belonged to Cohen. ((Id.))
Nearly one year later, Cohen has proved he is still a force to be reckoned with on Wall Street. Cohen converted the well-known SAC Capital Advisors into his new family office, Point72 Asset Management. ((Matthew Goldstein, New Name, New Office, Similar Performance for Steven Cohen, N.Y. Times DealBook (Oct. 16, 2014), http://dealbook.nytimes.com/2014/10/16/new-name-new-office-similar-performance-for-steven-cohen/.))
The major advantage of such a restructuring is that unlike hedge funds, family offices do not need to register as investment advisors with the SEC. ((Russ Alan Prince, From Hedge Fund to Family Office, Forbes (Nov. 20, 2013), http://www.forbes.com/sites/russalanprince/2013/11/20/from-hedge-fund-to-family-office/.)) Accordingly, there is less oversight of the daily operations of the fund. Since the conversion, Cohen has generated a year-to-date gross profit of about $1.8 billion, according to someone “in the know.” ((Goldstein, supra note 7.)) Through Point72, Cohen has lived up to his track record of outperforming many of his peers in the hedge fund industry. ((Id.))
For those who are concerned with the Justice Department’s frequent use of non-prosecution agreements, SAC’s guilty plea must have been considered a giant win. ((See David M. Uhlmann, Deferred Prosecution and Non-Prosecution Agreements and the Erosion of Corporate Criminal Liability, 72 Md. L. Rev. 1295, 1299 (2013).)) The real question remains, however. What actually changed after the prosecution of SAC? Sure, Cohen paid $1.2 billon, SAC became Point72, and some of Cohen’s employees pleaded guilty. But in the end, whether managing his money through a hedge fund called SAC Capital Advisors or a family office called Point72 Asset Management, one thing is undeniable: Cohen is at the top and his fortune is growing everyday.