FORTUNE — Regulators announced Friday that affiliates of the hedge fund SAC Capital had settled insider trading charges for more than $600 million. While the amount is stunning — with one settlement touted by the Securities and Exchange Commission as “the largest ever in an insider trading case” — some believe that this could actually be a positive development for SAC, a firm that has seen investors flee amid rumors of myriad insider trading investigations.
“This seems to be a de facto admission from the SEC that it’s throwing in the towel on its investigation into [Steve] Cohen,” says Andrew Stoltmann, a securities attorney in Chicago who specializes in investment fraud. “Usually these sorts of settlements come toward the end of its investigation.
The case against CR Intrinsic Advisors, which was settled for a record $602 million, is the one that has garnered the most attention from the press and from SAC investors. In that case, a portfolio manager named Mathew Martoma was sued in November for illegally obtaining confidential information from a doctor who was working on clinical trials for pharmaceutical company Elan (ELN).
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The criminal complaint filed against Martoma seemed to suggest that the government was getting closer to a case against SAC founder Steve Cohen, even though Cohen himself has never been accused of wrongdoing. That complaint tied phone calls between Martoma and Cohen to SAC’s trading activity in pharma stocks in 2008. Even though the government didn’t accuse Cohen of knowing that Martoma had obtained inside information, it was the closest that the firm’s founder had come to being associated with alleged wrongdoing.
Another unit of SAC, Sigma Capital, agreed to a $17 million settlement for insider trading associated with Dell (DELL) and Nvidia (NVDA).
Neither CR Intrinsic nor Sigma confirmed nor denied wrongdoing.
“[These settlements are] a substantial step toward resolving all outstanding regulatory matters and allows the firm to move forward with confidence,” an SAC spokesman said in a statement.
And while the SEC’s actions do not directly impact those made by the Justice Department, the two regulatory bodies likely discussed the settlement.
“The SEC usually coordinates with Justice on these types of cases,” says David Kotz, a director at the Berkeley Research Group who served as inspector general of the SEC from 2007 to 2012.
Kotz notes that other divisions of SAC were added to the CR Intrinsic amended suit and settlement, which gives SAC a global deal involving all entities that could have been involved in wrongdoing.
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“While any DOJ investigation of Martoma is not affected by this settlement, it makes little sense for Justice to proceed on its own in an attempt to prosecute CR Intrinsic or the rest of SAC for insider trading in this case,” says Kotz. “The DOJ has an even higher burden of proof to meet than the SEC to win.”
Ron Geffner, a securities lawyer at Sadis & Goldberg who worked in the SEC enforcement division, says the settlement is also positive because it does not bar anyone at SAC from working in the securities industry.
Even though the settlements seem to show that the government has been stymied in its efforts to nail Cohen, a billionaire trader and art collector who has long been plagued by rumors of insider trading, it might not make his investors feel better.
This February investors chose to withdraw nearly $1.7 billion from the firm, which at the time had $15 billion in assets under management, CNBC reported. Cohen’s personal fortune accounts for $9 billion of the firm’s AUM, according to reports, while investor money made up the remainder. It is uncertain why investors left, but the investigations seemed to be a motive. They maybe have been worried that a cultural problem at SAC encouraged insider trading or concerned that government probes would distract people from performing their jobs, it’s hard to tell. Despite all of the noise, SAC was reportedly up in the beginning of the year.
“A penalty of this magnitude for misbehavior, even without admitting or denying wrongdoing, implies an extreme violation of the rules,” says Tanya Beder, founder of the advisory firm SBCC.
“At the end of the day, when you own and operate a firm, you can’t extinguish your responsibility for knowing what is going on just because you delegate your compliance to a different manager,” Beder adds. “It is clear that the person at the top of SAC should have known what is going on.”
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It’s still possible that the government could be investigating Cohen for other matters. On a call with the press following Friday’s announcements, an SEC spokesman said that the settlement didn’t preclude other actions being brought against other individuals at SAC.
But with regard to the 2008 trades involving Martoma, the statute of limitations is running out, and the government would have to bring a case against Cohen by the end of the year. Moreover, Martoma, who continues to proclaim his innocence, has not cooperated with any government investigation into Cohen.
“The fact that Mathew Martoma apparently has not been willing to cooperate with investigators with respect to Cohen is likely a major reason why this settlement went through,” says Stoltmann.
So for now, SAC’s chief has been given room to breathe.
“Steve Cohen has not been charged with any wrongdoing and has done nothing wrong,” SAC said in its statement. This is true. As the facts stand, Cohen is an innocent man. For SAC’s sake, let’s hope this is all that matters to investors.
