Hedge Fund News Wrap: Week Ending 7/26/13

SEC Files Civil Charges against SAC’s Cohen, SAC Indicted by a Grand Jury in New York 

After weeks of deliberation and many years of investigation, the Securities and Exchange Commission has finally brought civil charges against SAC Capital’s founder, Steve Cohen. The SEC has charged the hedge fund manager with failing to supervise employees and prevent insider trading.

In response to these allegations, Cohen’s lawyers prepared a 46-page white paper for employees to read, stressing that the SEC’s allegations are “baseless.” Back in March, SAC had agreed to pay a record $616 million to settle allegations of insider trading.

However “baseless” these allegations may seem, a federal grand jury in New York proceeded to indict the $14 billion hedge fund on Thursday morning. The 40-page indictment report includes four counts of securities fraud and one count of wire fraud.

Criminal charges against big companies are rare, given the negative impact they would have on the economy and thousands of innocent employees. Already, the impact of these charges can be seen as investors have withdrawn between $5 and $6 billion from the firm.

However, many believe that these charges won’t necessarily destroy SAC Capital. Of the $15 billion that SAC managed at the beginning of the year, about $8 billion is Cohen’s own, personal funds.

Regardless, these charges will ultimately tarnish SAC’s reputation as one of the world’s leading hedge funds in the $2 trillion industry.

See detailed coverage from:
Dealbook
Forbes
Business Insider

 

SEC Rejects Previously Agreed Upon Settlement with Harbinger Capital 

The Securities and Exchange Commission has rejected a previously agreed upon settlement with Harbinger Capital, that would have totaled $18 million. Billionaire Phil Falcone, the hedge fund’s manager, had agreed to pay the amount to settle civil fraud charges including market manipulation, favoring certain investors and using the firm’s money to pay his own taxes.

This settlement would have also barred Falcone from running an investment firm, raising new funds or making capital calls on existing investors for two years.

The rejection comes amidst a series of relentless moves from the federal government, as it aims to crack down on insider trading and other financial fraud.

The reason for the SEC’s rejection is unknown, as they have declined to comment on the matter. However, the Commission does not reject settlements often, which suggests that they will take a more aggressive stance in enforcement matters.

The hedge fund manager could now face trial if the SEC decides to pursue its case.

See detailed coverage from:
Bloomberg
ValueWalk
Huffington Post

 

Activist Investor Loeb Sells Yahoo Stocks, Pockets $1 Billion in Profits 

Dan Loeb, the billionaire hedge fund investor, is selling most of his Yahoo stocks and is also resigning from the company’s board of directors. Loeb’s hedge fund, Third Point LLC, will sell 40 million of its shares back to Yahoo, for a total of $1.16 billion.

Yahoo! agreed to repurchase Loeb’s stock for $29.11 a share, which is a 124% increase since Loeb has been involved with the company. Furthermore, the purchase price reflects the closing price of Yahoo common stock last Friday, July 19th.

As part of the deal, Loeb’s hedge fund is barred from owning more than three percent of Yahoo!’s shares. In addition, the hedge fund manager is not allowed to solicit proxies or make a shareholder proposal until 2018.

Some publications are reporting that Yahoo wants Loeb to keep his hands off the company, with one analyst from the New York Times’ Dealbook writing that the share repurchase “has the whiff of greenmail.” Greenmail, which was a popular practice in the 1980s, is an antitakeover measure in which a company will repurchase the stock of corporate shareholders – usually at a premium – to essentially make them go away. Greenmail is banned in most states, but is still legal in Yahoo’s state of Delaware.

Loeb, who has played an essential role in revamping Yahoo during the past two years, spearheaded the ousting of former CEO Scott Thompson in May 2012. Marissa Mayer, from Google Inc., replaced Thompson and proceeded to make a series of expensive acquisitions, which includes the $1.1 billion purchase of Tumblr, Inc.

However, Mayer’s acquisitions have yet to improve Yahoo’s core business, as most of its stock’s value comes from the company’s 24% stake in Alibaba Group.

As the news rolled out, Yahoo’s stock declined 4.3% on Monday and closed at $27.86 a share.

See detailed coverage from:
Dealbook
Forbes
Deadline New York

 

Hedge Fund Manager’s Ex-Assistant Wants You to Pay for her Crimes 

Todd Meister’s former assistant, Renata Shamrakova, needs to raise $821,000 by December to keep herself out of jail for stealing nearly $1 million from her hedge fund boss.

However, Shamrakova has come up with a seemingly audacious way to raise the funds by setting up a page on GoFundMe.com. The page, “Restitution for Renata,” cites that a prison sentence would ruin her life both “physically” and “emotionally,” as jail is a “devastating place for a young girl to be [in].” Furthermore, Shamrakova goes on to write that she should be allowed a “second chance.”

Some publications have been less than forgiving by writing that Shamrakova is a “hedge fund thief” looking to “crowdfund” her way out of prison.

Allegedly, Shamrakova used her former boss’ credit cards to cover international trips, furniture, designer jewelry and clothes.

“Restitution for Renata” has raised a mere $300 as of Friday morning.

In addition, Shamrakova’s parents are selling their home in upstate New York, in hopes of helping their daughter stay out of jail.

See detailed coverage from:
FINalternatives
Inquisitr
New York Daily News