## Facts

- Federal prosecutors charged four affiliated hedge-fund management entities—S.A.C. Capital Advisors, L.P.; S.A.C. Capital Advisors, LLC; CR Intrinsic Investors, LLC; and Sigma Capital Management, LLC—with participating in a large-scale insider-trading scheme.
- A sealed indictment was filed in the Southern District of New York in July 2013 and later unsealed, publicly identifying the corporate defendants and charging securities fraud and wire fraud tied to insider trading by firm personnel.
- The government alleged the insider trading was widespread across multiple employees and persisted over time, generating hundreds of millions of dollars in profits and avoided losses.
- The prosecution’s theory emphasized institutional responsibility: management allegedly encouraged aggressive pursuit of information “edge,” while compliance and supervision allegedly failed to detect, investigate, or stop suspicious trading despite warning signs.
- The matter was resolved through a negotiated corporate guilty plea rather than litigation to verdict.
- In November 2013, the entities agreed to plead guilty to all counts and to a combined $1.8 billion resolution, split between a criminal fine and a forfeiture judgment in a parallel civil forfeiture action.
- In April 2014, the district court imposed sentence after accepting the guilty pleas, including a $900 million criminal fine, terms of probation, and operational and compliance-related conditions.

## Issues

1. Whether hedge-fund management entities can be held criminally liable for securities fraud and wire fraud when insider trading is carried out by employees within the scope of the firm’s business and allegedly enabled by supervision and compliance failures.
2. What sanctions and conditions are appropriate for institutional insider trading alleged to be substantial and pervasive, including the use of large fines, forfeiture, probation, business restrictions, and mandated compliance reforms.

## Decision

- The district court accepted guilty pleas by each defendant entity to all counts charged in the indictment.
- The court imposed a $900 million criminal fine and the statutory maximum five-year term of probation for each entity.
- As a probation condition, the hedge-fund operation was required to terminate its investment-advisory business for outside investors.
- The sentence required adoption of enhanced compliance measures, subject to review by an independent compliance consultant.
- Separately, the entities agreed to a $900 million forfeiture judgment in a parallel civil forfeiture proceeding, bringing total penalties to $1.8 billion.

## Legal Principles

- A business entity may incur federal criminal liability for employee insider trading charged as securities fraud and related wire fraud when the conduct is attributed to the organization through employee actions and the organization’s policies, supervision, or compliance environment.
- Wire fraud charges may accompany securities-fraud-based insider trading where interstate communications are used to execute or further the scheme.
- Corporate guilty pleas permit courts to impose organizational probation with conditions designed to prevent recurrence, including structural restrictions on business operations and mandated compliance reforms.
- Penalties in institutional insider-trading matters may include both criminal fines and forfeiture, reflecting punishment, disgorgement, and deterrence objectives.

## Conclusion

The corporate defendants resolved the prosecution by pleading guilty to securities fraud and wire fraud based on insider trading, and the court approved a sentence combining unprecedented monetary penalties with probationary conditions that restricted core business operations and required substantial compliance reforms.


United States v. S.A.C. Capital Advisors, L.P., No. 13-cr-541 (LTS) (S.D.N.Y. 2014)