After SAC Capital and founder Steven A. Cohen settled its insider trading lawsuit for a reportedly record-$616 million in March (see: SAC Capital Lawsuit Settled; Firm to Pay Record $616 Million for Insider Trading), several analysts predicted that the federal government would step up its investigation of Cohen and his firm's involvement in insider trading.
According to a CNN report, many SAC Capital investors—including Morgan Stanley and the Blackstone Group—are withdrawing funds from the firm, which includes significant money invested on behalf of investors.
For instance, the report states that Morgan Stanley "invests roughly $180 million of behalf of investors [and] decided to pull all of its money out after SAC announced it would not cooperate" with the Justice Department's investigation.
Other major clients said to be leaving SAC include Ironwood Capital and Magnitude Capital.
One anonymous source stated that "if it were up to me personally, I would stay in," noting Cohen's ability to generate profit.
Yet the same source described the toxic dilemma surrounding SAC: "As a fiduciary, I can't keep my clients' money there as this investigation gets closer to Cohen."
According to sources with knowledge of the numbers, SAC has suffered during the investigative process. Though the firm historically has returned over 25% annually, the fund returned just 6% through the end of April 2013.
Previously, the US Attorney for the Southern District of New York charged other SAC employees with securities fraud related to trading that took place between July and August of 2008.
With a five-year statute of limitations with which to prosecute those trades, time is running out for the federal government as the dog days of summer 2013 loom in the distance.
SAC may still wind up returning all outside capital with some investors speculating the move to liquidation and the repayment of investor capital could take place "within 60 to 90 days."
If you have invested with SAC Capital, Steven A. Cohen or with any firm or broker involved with SAC Capital investments or whose suspected involvement in insider trading, fraudulent activity or any other financial misconduct has proven harmful to your investments or interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.
News: Investors flee SAC Capital (CNN Money)