There is More to the SAC Capital Story

3 min read

Around 10 years ago a small number of citizen activists began identifying SAC Capital as being a central player in a “network” of hedge funds that engaged in all manner of dubious practices.

The media ignored the citizen activists.

In 2005, Patrick Byrne, then CEO of internet retailer Overstock.com (and future reporter for  DeepCapture.com) gave a famous conference call titled “The Miscreants Ball” in which he sought to expose a “network” of miscreant hedge funds. Soon after, Patrick identified SAC Capital as being the central player in that miscreant network.

The media ridiculed Patrick.

In 2007, DeepCapture was founded, and in May 2008, we published “The Story of Deep Capture” to tell the story of how DeepCapture came into being and to expose a pack of prominent journalists who seemed to be doing the bidding for (i.e. they were “captured” by) a “network” of miscreant hedge funds, including SAC Capital.

Since then, DeepCapture has published numerous stories exposing various misdeeds that have been perpetrated by these journalists and hedge funds, including SAC Capital. Some of the journalists ignored us. Some of them ridiculed us. Some of them, such as the eminently corrupt Gary Weiss, ridiculed us and fought us at the same time.

Gandhi said: “First they ignore you, then they ridicule you, then they fight you, then you win.

Then the news broke (this week) that SAC founder Steve Cohen has received a subpoena to appear before a grand jury, possibly a prelude to an indictment of Cohen and/or his hedge fund. In addition, the media has reported that SAC Capital is the main target of the largest insider trading investigation in FBI history, and the media has even reported (at long last and accurately) that SAC Capital is part of a larger “network” of financial operators and hedge funds involved in insider trading. So, apparently, we win.

But we have not won.

We will not have won until the day when the media reports that SAC Capital and other hedge funds in its “network” are involved in activities that are more damaging to the markets than mere insider trading. For example, some of the creditors to Lehman Brothers have sued SAC Capital and two other hedge funds for allegedly perpetrating manipulative short selling that triggered the 2008 death spiral in the stock price of Lehman Brothers and the resulting collapse of that bank.

You will recall that the collapse of Lehman Brothers brought the global financial system to the brink of apocalyptic ruin.

It is not clear what the status of that lawsuit is, so we cannot yet say with certainty that SAC Capital was the culprit behind the manipulative short selling that contributed (as even the SEC noted in 2008 “Emergency Order”) to the collapse of Lehman, but there is little doubt that hedge funds in the “network” have schemed to destroy other important companies. Have a read, for example, of the following email.

= = = = =Begin Message= = = = =

Message # : 727

Message Sent: 02/22/2006 08:57:48

From: AHELLER3@bloomberg.net|ANDY HELLER|EXIS CAPITAL MANAGEM

To: JONKALIKOW@bloomberg.net|JONATHAN KALIKOW|STANFIELD CAPITAL

Subject: CNBC – FAIRFAX

Reply:

He did this one time before, and the stock went down 3 on the open, then closed up 1. the way to get this thing down is to get them where they eat, like the credit analysts and holders. we’re taking this baby down for the count. ads and I are going to toronto in 2 weeks for a group lunch. J

= = = = =End Message= = = = =

That email was authored by a top employee of Exis Capital, which is an offshoot of SAC Capital, and as you can see, it concerns a conspiracy to take “this baby down for the count.” The “ads” to attend the “group lunch” was former SAC trader Adam D. Sender, head of Exis. The “baby” to be taken “down for the count” (unsuccessfully, in the end) was Fairfax Financial, a major, publicly listed insurance and financial firm.

The emails were acquired through discovery in Fairfax’s lawsuit against a group of hedge funds, one of which was SAC Capital. Although SAC Capital was ultimately dropped from the lawsuit, SAC’s satellite funds (including Exis and an outfit called Sigma Capital) were not dropped from the suit, which is ongoing. And the discovery from that lawsuit has produced additional evidence of shenanigans at SAC Capital. See, for example, DeepCapture stories “Hedge Funds Reading Tomorrow’s Headlines Today,” and “Hedge Funds Scurry…”

It is important for the media to begin paying attention to SAC Capital’s more egregious behavior because far too many people believe that SAC has done no worse than engage in a bit of insider trading, and a lot of people regard insider trading as nothing worse than “good research.” In addition, failing to tell the full story ensures that history will repeat.

Back in 1991, when Michael Milken was sentenced to prison, the media reported that Milken’s principal crime was insider trading when, in fact, he and others in his “network” had also “busted out” (i.e. looted and destroyed) multiple savings and loan banks, some of them among the most important financial institutions in the nation. Those “bust-outs” contributed to the savings and loan crisis that began in the late 1980s, and which ultimately cost American tax-payers billions of dollars in bailouts—a portent of bigger and better things to come.

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33 Replies to “There is More to the SAC Capital Story”

  1. As Bethany McLean later described in Fortune:

    Even hardened denizens of Wall Street were shocked by a conference call that Patrick Byrne, the CEO of online retailer Overstock.com, held on Aug. 12. “I want to get something off my chest,” Byrne announced. Then he launched into a rant about a “miscreants ball” in which he mentioned hedge funds, journalists, investigators, trial lawyers, the SEC, and even Eliot Spitzer. “I believe there’s been a plan since we were in our teens to destroy our stock, drive it down to $6–$10 … and even a plan for how the company would then get whacked up.” The “designated final owner,” who provided the “orchestration,” was someone Byrne dubbed the “Sith Lord,” a person he refused to identify other than to say that “he’s one of the master criminals from the 1980s.”

  2. Ahhh Mark, I think you hit the hive and now all the little workers bees are out in full force!! LMAO at them!! If they only had a clue as to what is about to hit them “LIKE A FREIGHT TRAIN”. Hang on guys much more to come. Andy is that the best you got? A gun on a plane, Little Stevie may have to shut his 15 billion dollar ponzi scheme err I mean hedge fund and maybe going to jail and this is you’re comeback..very weak.. very weak!!! LOL!!

  3. I just don’t know what to think of Byrne’s claims, but I’m glad to see you’re still at it, Mark, and I have no doubt whatsoever that naked shortselling is, if not THE crime of the century, it’s in the top 10 — and given the times, that’s really saying something.

  4. I just don’t know what SAC can say to justify all of the “evidence” that has been proven in the Fairfax case.

  5. well, that is, it was a contender until certain disclosures about the obama administration came to light…

  6. I see the cartel is out doing damage control. Way to go Mark and Patrick! And Preet Bahara! And those behind the scenes. Not everybody can be bought off. You guys have done more for the world than we can ever repay you for.

    Webster’s needs to expand the definition of philanthropy to include:

    Philanthropy – other- groups of vile crooks who bankrupt the land driving scores of people to suicide and then hold a big party for themselves where they kick a tiny piece of their booty to charity and then strut around like peacocks on the less fortunate’s graves.

    Little Stevie and Mikey
    Sat in their mansions
    Eating everybody else’s lunch
    They stuck in their thumb drives
    And pulled out some bribes
    And said we run the world ha ha!

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  7. To bust out the banking system and the world economy, to take down home ownership and cause massive foreclosures, to crush people’s retirement dreams, to kill companies with cures to cancer and solutions to protect soldiers….

    …that’s treason.

    According to Wikipedia “the federal government retains the death penalty for such non-murder offenses as treason”

    Mikee and Stevie have been bad boys.

  8. That’s why you should be sure your financial meltdown is only temporary, so you are able to use the loan amount you’ve agreed to pay back.

    Other than some of the lenders may need a post dated check containing the borrowed funds total and also the payable
    rate of interest.

  9. Let us not forget those financial jour-anal-ysts co-conspirators that provided cover for these traitorous crooks.

    David Faber comes to mind with respect to the Lehman Bros failure and the statements he made while on the air about Lehmans financial condition.

    1. ah yes the notorious cnbc bobble heads. maria comes to my mind and the characteristics of a family.
      lma(zz)o check out the surname that cnbc money honey married into. a sequel to the fall of the house of steinberg is in the making, attributed to a current federal grand jury indictment of a sac veteran portfolio manager also characterised as mr cohens trusted lieutenant by peter lattman at nytimes dealbook. family traits and family ranks make interesting hierarchy charts.

  10. Pity the bloggers at Zerohedge did’nt read Deepcapture 4 years earlier huh? LOL!! Miscreants beware!!

    With The Unwind Approaching, Here Are $18.6 Billion SAC Capital’s Largest Stock Positions
    Submitted by Tyler Durden on 05/25/2013 – 16:46
    Nearly three years ago, following the publishing of “Is The SEC’s Insider Trading Case Implicating FrontPoint A Sting Operation Aimed At S.A.C. Capital?” which exposed the key aspects of SAC’s insider trading strategy, and which linked SAC, and the hedge fund world in general, to expert networks three weeks before virtually anyone outside of the 2 and 20 (or 3 and 50 as the case may be) world had heard of them and before they became a household euphemism for insider trading, we expected the full rabid fury of the world’s best paid legal team to fall upon us. It didn’t, which meant only one thing: we were correct, or they had bigger fish (to avoid harpooning) on their mind. Turns out it was both.

    http://www.zerohedge.com/news/2013-05-25/unwind-approaching-here-are-186-billion-sac-capitals-largest-stock-positions

  11. The piece de resistance (French for our miscreants)

    But the final blow against the formerly infallible hedge fund that redefined the concept of “information arbitrage”, and whose track record was almost as successful as that of Bernie Madoff, came from Blackstone, which as Reuters reported moments ago, has decided to pull all its money from SAC, which is the official end of SAC as an outside investment asset management operation. Because once the fund of funds operator, and the largest outside investor in SAC, votes no confidence in Cohen, it’s game over, and at best SAC may remain as a family and employee-funded office, assuming of course the DOJ doesn’t actually decide to demand restitution for years and decades of insider trading.

  12. Follow up with RICO cases versus the following:

    Soros
    Loeb
    Chanos
    Einhorn
    Cramer
    Greenberg
    Icahn
    Falcone
    John Paulson
    Corzine
    Dimon
    Blankfein
    Fink
    Savitz
    Value Investors Conference

    Have I missed any?

  13. Yes you have.. John Mack,Ken Langone,Art Sanberg, Maurice Hank Greenberg, Ken Lewis, David Rocker, Christoper Cox, Sandy Weil, Robert Rubin, Larry Summers, Tim Geithner, Henry Hank “the skank” Paulson, Dick Fuld and last but not least the Master/Maestro, Master Manipulator,Mega Meglomaniac Michael Miliken himself are Some of the other miscreants/ enablers are gone but not forgotten that should be added to that list!!Also, I may have been wrong about the immediate demise of Little Stevie.. it could be death by a thousand redemptions (sp)!!! LOL!!!

    http://www.reuters.com/article/2013/05/31/us-sac-magnitude-idUSBRE94U15420130531

  14. Politics: Why Didn’t the SEC Catch Madoff? It Might Have Been Policy Not To

    More and more embarrassing stories of keep leaking out of the SEC, which is beginning to look somehow worse than corrupt – it’s hard to find the right language exactly, but “aggressively clueless” comes pretty close to summing up the atmosphere that seems to be ruling the country’s top financial gendarmes.

    http://m.rollingstone.com/?redirurl=/politics/blogs/taibblog/why-didnt-the-sec-catch-madoff-it-might-have-been-policy-not-to-20130531

  15. Patrick and OSTK are doing fine and moving up and SAC and Stevie baby is going down.. how fitting is this end?! Karma baby.. it’s come full circle!!!

    Hedge fund manager Steven Cohen slipped $500 million, according to the Bloomberg Billionaires Index. Cohen’s firm, SAC Capital Advisors LP, received billions of dollars in withdrawal requests this week, according to two people who saw the contents of a June 4 e-mail sent to employees by SAC President Tom Conheeney.
    Enlarge image
    Steven Cohen, founder and chief executive officer of SAC Capital Advisors LP, doesn’t want to let the government get the best of him and is seeking to defend a reputation as one of the most successful hedge-fund managers ever, said the people, who asked not to be named because the information is private. Photographer: Ronda Churchill/Bloomberg
    “We don’t like losing capital, but even with the investors that are leaving, we still have a stable capital base and have been performing well this year,” Conheeney said in the e-mail. Even if the firm ended this year with assets close to where it was four years ago, “we will still be a good-sized firm.”
    SAC employees had expected that clients, who faced a June 3 redemption deadline, would take back most of the $4 billion they haven’t already marked for redemptions by early next year, people familiar with the firm said earlier this week. Investors are exiting as the U.S. government intensifies its probe of insider trading at the Stamford, Connecticut-based firm, once one of the best in the industry, with returns averaging 25 percent since 1992.
    Cohen, 56, is ranked 119th on the index with a net worth of $9 billion.

  16. stevie is getting reaady to Roll Early- Roll Often.

    SAC capital is going down for the count this time and Gary Weiss could not be anymore quieter.

  17. I hope he is “busted out” just like he has done to everyone else. This has to stop before everyone loses confidence- if they haven’t already.

  18. you’re a moron and horrible journalist – do your due diligence – exis has nothing to do with SAC capital – and the fact that you are re-publishing the same “AHELLER” email from YEARS ago shows you’re desperate for material – get a job you pathetic hack

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At the time much of the content on DeepCapture.com was written, the Great Financial Crisis of 2008 was either on the verge of happening or had just occurred. In those days, emotions among this publication’s contributors were raw and, in an effort to get their warnings noticed and appropriate blame placed, occasionally hyperbolic language and shocking imagery were employed.

Were we to write these entries today, a different tone would most certainly prevail.

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