SAC Capital Indicted on Decade-Long Fraud Conspiracy Charges
Updated from 2:52 p.m. ET with SAC Capital statement and additional information throughout .
NEW YORK ( TheStreet) -- If Steven A. Cohen and his hedge fund SAC Capital are the prized catch in a half-decade regulatory dragnet of insider trading on Wall Street, Thursday may be the day legal authorities finally set their hook.
A grand jury has indicted hedge fund giant SAC Capital for one count of wire fraud and four counts of securities fraud, in an insider trading conspiracy U.S. prosecutors allege lasted over a decade and led to hundreds of million of dollars in illegal profits and avoided losses.
"Unlawful conduct by individual employees and an institutional indifference to that unlawful conduct resulted in insider trading that was substantial, pervasive and on a scale without known precedent in the hedge fund industry," U.S. prosecutors said in a criminal complaint unsealed on Thursday.
The hedge fund's alleged insider trading occurred between 1999 and at least 2010, according to the complaint, which was filed by Preet Bharara, U.S. Attorney for the Southern District of New York.
"SAC became, over time, a veritable magnet for market cheaters," Bharara said at a Thursday press briefing.
Illicit profits came "at the expense of members of the investing public," and prosecutors will seek a forfeiture of alleged unlawful gains, Bharara said. The U.S. attorney also levied civil money laundering charges against the fund.
While prosecutors are indicting SAC and its affiliates CR Intrinsic and Sigma Capital , they have not charged the hedge fund's billionaire head Steven A. Cohen.
Fraud charges against SAC Capital do put the firm's viability in doubt. "SAC will continue to operate as we work through these matters," Jonathan Gasthalter, a spokesperson for SAC Capital, said in an e-mailed statement Thursday. "SAC has never encouraged, promoted or tolerated insider trading."
SAC Capital has hired law firms Willkie Farr & Gallagher and Paul, Weiss, Rifkind, Wharton & Garrison to defend the fund against the government's charges.
At its peak, SAC Capital managed over $15 billion in investor assets and boasted some of the best returns in the industry since its founding in 1992. The fund also made its founder Cohen a billionaire as a result of abnormally high fees, charging investors up to 3% annually for assets under management and 50% of investment gains.
The criminal complaint alleges SAC's insider trading involved at least eight portfolio managers and research analysts and the trading of nearly two-dozen publicly traded companies such as Dell
Prosecutors also said on Thursday Richard Lee, a former SAC Capital portfolio manager, pleaded guilty on July 23 to conspiracy and securities fraud after admitting he obtained inside information and made trades based on that information while employed with SAC.