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SAC Capital


Tommm50
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It seems the drumbeat gets louder over the various FBI and SEC investigations into SAC Capital. Insider trading settlements and talk of criminal charges keep mounting. It sure makes you wonder how the New Jersey judge could so easily dismiss Mr. Cohen from Fairfax's lawsuit. Particularly since his deposition has since been shown to display a very cavalier attitude toward insider trading or internal controls. Scent of corruption.

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  • 2 months later...

It seems the drumbeat gets louder over the various FBI and SEC investigations into SAC Capital. Insider trading settlements and talk of criminal charges keep mounting. It sure makes you wonder how the New Jersey judge could so easily dismiss Mr. Cohen from Fairfax's lawsuit. Particularly since his deposition has since been shown to display a very cavalier attitude toward insider trading or internal controls. Scent of corruption.

 

 

Ironically, the depositions of Cohen taken in the FFH lawsuit that was dismissed by the judge have become the key to the recent criminal indictment of SAC Capital because the depositions revealed a cavalier attitude by S. A. Cohen toward the possibility of insider trading by his staff, contrary to his responsibility as manager.

 

Gotcha!

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SAC RE has been put on watch with negative outlook by AM Best due to reputational risk and questions about being able to execute its business plan as a result of the troubles at its sponsor and investment manager, SAC Capital.

 

AM Best also cited the risk that SAC RE might lose key staff.

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Obviously, the spiral is accelerating .....

 

Now a true bastard would also be short the public shares of any others in the same industry - as the ripples from a fail here, would be highly likely to swamp them as well. .... And given what we know about the alleged attitude to inside trading, one has to wonder who is probably holding the majority of the long puts & short calls on those companies.

 

They must have redemption requests well above their capacity to pay, & there are only 5 options; repay from asset sales, repay from margin borrowing, repay from refinancing roll-overs, trade your way out, or declare a temporary moratorium. How long can it really be before the moratorium shows up - & as soon as it does; it will trigger the AM Best downgrade.

 

Then keep in mind that if you have a large redemption order which is not being settled - you can also sue for non-payment. And you WILL sue  - as your intent is to push the debtor into Chapter 11 as rapidly as possible, to retain as much collateral as possible. The cure is to pay out the redemption immediately, &  in T-Bills. Except where do they get the money.....

 

One has to think that in the climate of tapering; one of the most effective & efficient tapers would be a Fed assumption after they are in Chapter 11. Pay out the redemption orders in longer dated treasuries, & hold back that owed to the principals against future fines; very little actual cash involved, & no better position from which to impose a new industry regime going forward.

 

If you want to make your name ........

 

SD

 

 

 

 

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The case is slowly crawling forward...

 

Fairfax ‘confident’ claims against SAC will be reinstated

2013-07-25 the Globe & Mail

 

 

Criminal charges filed against U.S. hedge fund SAC Capital Advisors LP by federal prosecutors could invigorate Fairfax Financial Holdings Ltd.’s lengthy legal battle with the firm and its wealthy founder, Steven Cohen.

 

On Thursday, a grand jury charged that the insider trading at SAC was “substantial, pervasive and on a scale without known precedent in the hedge fund industry.” The move calls into question the future of the aggressive and well-known hedge fund SAC. But for Toronto-based insurer and investment manager Fairfax, the indictment in some ways vindicates its long and high-profile battle with the company.

 

 

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Hedge fund SAC Capital, indicted for fraud, has been frequent foe of Canadian companies

2013-07-25 FinancialPost.com

http://business.financialpost.com/2013/07/25/hedge-fund-sac-capital-indicted-for-fraud-has-been-frequent-foe-of-canadian-companies/

 

Court documents filed by Fairfax in the Superior Court of New Jersey’s appellate division on May 31 say the trial court erred in granting SAC a summary judgment “on hotly disputed questions of material fact,” such as SAC’s economic interest in the alleged scheme’s succes

 

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I thought mail servers kept track of whether you opened an email or not? in fact they might even keep track of when it is opened. I guess SAC just deleted those records.

 

Remember that one can ask for a return receipt or open receipt when sending emails. So such information is available.

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What a nice fantasy, Fairfax gets $6 Billion out of SAC Capital and makes a special dividend of half of it to loyal shareholders.

 

Unfortunately, they're still a long way from nailing his hide. Then they need to nail all the co-conspirators. And while we're talking rooked dealings does anyone else think it was too convenient that the analyst for Morgan Keegan that wrote the report saying Fairfax was billions underreserved wound up dead?

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  • 2 weeks later...

Some updates about SAC...

 

$ 5 Billion Protective Order

 

http://origin-www.bloomberglaw.com/iframe/document/X1Q6MPGNHO82/download?doc_container=content_document&imagename=9-1.pdf&root_url=http%3A%2F%2Forigin-www.bloomberglaw.com%2F&disposition=attachment

 

 

DOJ’S PURSUIT OF HEDGE FUND SAC RAISES INTERESTING LEGAL ISSUES, EXPERT SAYS

 

http://about.bloomberglaw.com/law-reports/dojs-pursuit-of-hedge-fund-sac-raises-interesting-legal-issues-expert-says/

 

SAN FRANCISCO–The Department of Justice’s recent indictment of SAC Capital Advisors LP and its separate action seeking civil forfeiture are based on “very unusual facts,” and raise interesting legal questions, Stanford law professor Joseph Grundfest said Aug. 11.

 

POTENTIAL SETTLEMENT TERMS

 

The $5 billion amount is a “public disclosure” of what the government wants in this case, Grundfest said. “You can smell the dimensionsof a potential settlement from the protective order: forfeiture in an amount less than $5 billion, an agreement from SAC to put a monitor in place, and perhaps negotiation on whether to limit SAC founder Steven Cohen’s participation in the securities industry, he said. “You can see the parameters of how this case might settle.”

 

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Facing Loss of Capital, SAC Is Said to Talk of Layoffs

2013-08-09 NYTimes

http://dealbook.nytimes.com/2013/08/09/sac-to-keep-managing-money-while-facing-indictment/

 

For now, SAC can continue operating under the terms of the deal struck this week with prosecutors. Called a protective order, the deal says that SAC must maintain a certain percentage of its assets across its various funds, an amount that equals about $5 billion, according to a person briefed on the case. If assets fall below that threshold, SAC must replenish them by the next month.

 

Judge Richard J. Sullivan of Federal District Court in Manhattan signed off on the order, which was intensely negotiated by SAC’s legal team and government lawyers since the indictment.

 

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SAC Capital Closes a Trading Unit as It Starts to Retrench

2013-08-12 NYTimes

http://dealbook.nytimes.com/2013/08/12/sac-capital-closes-a-trading-unit/

 

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SAC Shrinks U.S. Stock Holdings by $2 Billion Amid Probe

2013-08-15 Bloomberg

http://www.bloomberg.com/news/2013-08-15/sac-shrinks-u-s-stock-holdings-by-2-billion-amid-probe.html

 

 

 

 

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"SAC was granted approval by a judge last week to continue operating until the insider-trading cases are resolved. The approved plan requires that SAC maintain at least 85 percent of the “aggregate value” of assets owned by the firm’s “entity defendants” as of July 1, and in exchange, allows for the fund to continue its lawful operations. If the assets fall below the specified level in a given month, the fund is required to “replenish” the monies, according to the Aug. 9 order"

 

Very clever market solution.

 

SAC is effectively short a put for 85% of the July 1 asset value, with any MTM valuation delta coming directly out of partner pockets. With their scale they can only either put on a market hedge (affecting put-call parity), or defend the July 01 market level via the option market. In practice; they either bleed cash (option premiums) or absorb market volatility & cover any losses. The wrong trade puts them out of business, the right one ensures the fines get paid, & any liquidity concern will shut them down immediately (Fed acting through GS).

 

Their worst nightmare has to be a flash crash large enough to trigger a pile-on, & a HF trading selloff - as they would be forced into paying premium put prices, & selling down the equity positions to raise cash. Those piling on get to buy in that equity cheaply, & then cover their puts shortly after they revert to net buying. And once the options are covered, rinse & repeat ? 

 

The market as a whole gets a put at 85% of the July-01 level, & we get rising volatility the closer we get to the 85% strike. Makes one think of the manipulation in the option trading market when FFH was being targeted.

 

SD

 

 

 

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  • 5 months later...

"Bharara said the conviction 'likely will result in the forfeiture of his illegal windfall.'”

 

My guess the windfall refers to his $9.3M bonus as I don't know how they could forfeit the $275M benefit. Assuming that's true, it effectively means that SAC, who paid the bonus, would be allowed to recoup?

 

-Crip

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