The FBI Is Definitely Targeting SAC Capital

The government is gunning for Stevie Cohen’s SAC Capital.

That’s pretty much the inescapable implication of a long article by Matthew Goldstein and Svea Herbst-Bayliss at Reuters about the lead FBI investigator in the Galleon case.

B.J. Kang, the FBI agent, was part of the investigation into alleged accounting irregularities at Canadian insurer Fairfax Financial Holdings Ltd.  That inquiry was mysteriously dropped. But while it was going on, Fairfax sued SAC Capital and other hedge funds alleging they were engaged in market manipulation to drive down the price of Fairfax’s shares.

But the FBI was now on the SAC  case. In 2007, Kang worked on a previously undisclosed investigation involving alleged trading irregularities at SAC. “That inquiry, opened by federal prosecutors in Brooklyn, New York, concluded with authorities declining to take action against Cohen or anyone else associated with SAC,” Goldstein and Herbst-Bayliss reports.

And that’s when things get seriously weird.

From Reuters:

But before the probe by Brooklyn prosecutors was closed, Kang interviewed former SAC analyst Andrew Tong, who had already become a tabloid sensation — not to mention an embarrassment to SAC.

In a lawsuit earlier that year Tong had charged that his male supervisor, Ping Jiang, then a top SAC trader, forced him to perform oral sex on him before completing a trade, according to people familiar with the investigation and court papers. Tong also alleged Jiang ordered him to take female hormones to turn him into “the ideal analyst/trader,” combining both male and female characteristics, the court documents note.


The article goes on to describe how the government tried to get Richard Choo-Beng, a former SAC employee who is a cooperating witness in the Galleon case, to return to SAC Capital. Cohen refused to hire him, however, because he was suspicious about why another fund Lee had worked for had closed.

Lee’s plea agreement requires him to provide the government with evidence of alleged insider trading from 1999 to 2007. For five of those eight years, Lee was working for SAC.

“The government’s interest in SAC and Cohen shouldn’t surprise anyone. Cohen’s firm stands at the pinnacle of the $1.5 trillion hedge fund industry. Critics have often complained that SAC gets better access to information from Wall Street firms because of its sheer size and the hundreds of millions in commissions it pays out,” the Reuters reporters write.

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