Cohen might be hit with civil charges


It appears that the SEC stands ready to indict SAC Capital on civil fraud charges.

One big issue is whether those charges will be leveled against founder Steven Cohen personally as well. A Bloomberg scoop holds that the SEC is indeed considering such a move. The Wells notice sent to SAC Capital cited fraud and control-person liability over its management of CR Intrinsic Investors, a unit of SAC. But "investigators are considering extending the claims to Cohen, who wasn't named in the Wells notice."

That suggests that the SEC has some interesting, to say the least, evidence up its sleeve. The SEC would not be likely to pursue control-person claims against Cohen personally without being able to show that he deliberately circumvented SAC Capital's safeguards or directed Martoma to make illegal trades, according to one former SEC attorney.

He noted that, "As a matter of policy, the agency has typically avoided cases that second-guess supervisors without evidence they were acting in bad faith."

Civil cases are more prosecutor friendly than criminal cases. As of now, the civil charges levied against Cohen personally may be the best that law enforcement officers can do. Without the cooperation of Mathew Martoma, it does not appear that a criminal indictment will be forthcoming, unless the prosecutors have some evidence or another witness that no one yet knows about.

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