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Back to bare walls: Feds looking to roll SAC for up to $10 billion

By
Kaja Whitehouse
Published July 26, 2013, 4:00 a.m. ET

(
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We want it all!

In addition to hitting SAC Capital Advisors with criminal charges, prosecutors are moving to grab as much as $10 billion from the embattled hedge fund, sources said.

That’s just about all the non-outsider cash under management at the Stamford, Conn., hedge fund — and includes about $1 billion of employees cash.

If successful, it could wipe out a vast majority of Cohen’s wealth.

Uncle Sam will be able to grab the cash — while not officially looking to shutter the 21-year-old firm — under the civil complaint filed yesterday alongside the criminal indictment.

The government is seeking the forfeiture of “any and all assets” in some two dozen SAC hedge funds.

Manhattan US Attorney Preet Bharara declined to put a dollar figure on the forfeiture, but experts said the complaint indicates that prosecutors could pursue the bulk of SAC’s billions.

“That means they want everything in the pot,” said former Manhattan federal Judge Richard Holwell. “If it says ‘any all and assets,’ then they’re going after the whole enchilada.”

SAC had $15 billion under management earlier this year. Some investors, jittery over the federal probe, have withdrawn some cash.

But that is not the end of Cohen’s troubles.

A civil action by the Securities and Exchange Commission filed last Friday seeks a lifetime ban on Cohen managing outside cash.

That could force as much as $6 billion out the door — and hit Cohen in the wallet.

SAC has averaged 30 percent annual returns in recent years — a success rate that has allowed him to charge a management fee of 3 percent plus up to 50 percent of profits, well above the norm.

If SAC managed to post 25 percent annual returns over the next 10 years and the SEC was successful in its attempted ban, Cohen would stand to lose nearly $10 billion in profits in that span.

That’s a total of $20 billion lost — big money for even a big shot like Cohen.

The 57-year-old mogul, an avid art collector, could even be forced to sell off a De Kooning or Picasso or two.

For now, SAC plans to stay in business.

“SAC will continue to operate as we work through these matters,” said spokesman Jonathan Gasthalter.

The firm stressed that prosecutors have not sought to freeze SAC’s assets or otherwise tamper with its business as the case winds through the courts.

SAC also anticipates obtaining a protective order to “expressly permit SAC to continue its operations in the ordinary course.”

Cohen, a world-renowned art collector worth an estimated $9.3 billion, founded SAC in 1992 with $20 million of his own money. He built the firm into a Wall Street powerhouse over two decades and boasts one of the best track records in the business. SAC had just one losing year — in 2008.

At SAC’s Stamford, Conn., headquarters yesterday workers were carrying on as usual during lunch hour. Most declined to talk to the press, although one maintained it was business as usual.

“I am here. I am doing my job,” he said.

— with Michelle Celarier