STAMFORD, Conn., June 3 (UPI) -- SAC Advisors is faced with a retreat of major clients in light of the firm's legal problems, sources close to the matter told The New York Times.
As an insider trading investigation drags on past an agreement to a record $616 million settlement with the U.S. Securities and Exchange Commission, the firm faced a Monday deadline for quarterly withdrawals that could decide the fate of the company, the Times reported.
Investment firm Blackstone Group was likely to withdraw about $250 million of the roughly $500 million of the firm's funds SAC manages, the Times said. Magnitude Capital has initiated a request for a withdrawal and Ironwood Capital Management has also begun a retreat from SAC, which is under siege from authorities seeking to get to the bottom of an insider trading scandal that has implicated nine SAC employees, including four who have pleaded guilty, the Times said.
About $1.7 billion of the $15 billion SAC manages has been withdrawn, which is about a quarter of the firm's outside funds. The bulk of the funds SAC manages belongs to the firm's founder, Steven Cohen, and to employees of the firm.
Monday's withdrawals could tip the balance to the point that the firm decides to manage only its own funds and return all of its clients' money. Or it could go so far as to manage only Cohen's funds and not even bother with its employees' funds.
Authorities are running up against statute of limitation deadlines having to do with trades from 2008 that they suspect not only involved insider trading, but also implicate the fund's founder.
Former SAC employee Mathew Martoma has been accused of trading stock in two drug companies, Elan and Wyeth, based on confidential information concerning the outcome of clinical drug trials.
Using the insider information, authorities say Martoma allowed SAC to either earn or avoid losses amounting to $276 million.
Martoma has denied he is guilty and is not cooperating with authorities. But his cooperation, if he changes his tactic, could be decisive. Cohen authorized the trades involving the drug companies, but authorities also need to prove whether or not he was aware of the confidential information that was the reason behind the trading, the Times said.
Cohen has yet to be charged with any crime.
