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November 30, 2012 12:55 am
Steven Cohen, the founder of SAC Capital, said his hedge fund sold $700m of stocks at the centre of an insider trading investigation because one of his managers said he was “no longer comfortable” with the position, according to people familiar with testimony Mr Cohen gave to investigators.
The Securities and Exchange Commission took Mr Cohen’s testimony earlier this year, thought to be his first explanation for SAC’s trading of shares of Elan and Wyeth that were made days before the companies announced negative clinical drug trial results that sent their stocks tumbling.
People familiar with the interview say Mr Cohen’s memory was otherwise vague and that he could recall few details of the content of a 20-minute phone conversation, held in 2008, with Mathew Martoma, the portfolio manager who allegedly told Mr Cohen he was not comfortable with the position.
Mr Martoma was last week arrested and charged with fraud for allegedly trading the drug stocks after learning about the negative drug trial results from a doctor on the panel.
SAC, which is likely to face civil fraud charges, is at the centre of what authorities allege is the most “lucrative” insider trading case in history.
The investigation has put Mr Cohen, who has impressed Wall Street over two decades with his trading prowess, in the spotlight.
SAC’s investors were told on a conference call on Wednesday that the hedge fund was likely to be sued by the SEC.
At least two other SAC employees were also interviewed by the SEC, including Phillipp Villhauer, a person familiar with the matter said. Mr Villhauer is described in the SEC’s court filings as Mr Cohen’s “head trader,” these people said.
An SAC spokesman declined to comment on Mr Cohen’s testimony but previously said SAC is co-operating with the investigation.
Mr Cohen told investors that he acted appropriately. Neither SAC, Mr Cohen or Mr Villhauer have been accused of any wrongdoing.
By dumping the shares in Elan and Wyeth and placing bets that both stocks would drop, SAC funds made more than $81m in profits and avoided $194m in losses.
Mr Martoma’s lawyer said he was confident his client would be “exonerated.”
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