Skip to main content

SAC Not Sweating SEC Investigation Into Fairfax Trades

  • Author:
  • Updated:

Fairfax Financial, a Canadian Insurer, still has it in their head that some of the most feared and respected hedge funds got non-public information about the company and spread it around the street encouraging their buddies to short the heck out of the stock.
Matt Goldstein, at Reuters, is now reporting that the SEC has taken notice of an on-going civil suit Fairfax filed, in 2006, against noted short-seller Jim Chanos and Stevie Cohen and has started their own investigation. One that Reuters thinks will involve these titans' funds into being forced to turn over any and all trading records to the folks that missed the Madoff Ponzi scheme.

Now we know if the SEC were to actually charge SAC for anything related to cheating the market so they could earn more than the folks at Goldman ever have a chance to make- it would be a huge victory that could actually restore investor confidence in the organization the government funds to police people who try to cheat the market.
But here's the thing, Stevie isn't sweating this case. First of all they haven't been served a Wells Notice. Something the SEC has to do before they charge a hedge fund like SAC with a crime (not in the seventeen years SAC has been around have they EVER been issued a Wells Notice). Also, according to sources inside SAC, no one has been questioned yet by the feds over trades involved with Fairfax Financial.
Second, according to court transcripts related to the Fairfax civil suit against the hedge funds, and reviewed by Dealbreaker, Team SAC says they were going the opposite way of the trade that Fairfax claims they were. Meaning they were actually buying more stock in Fairfax and not shorting it. Sources inside SAC also say that if Stevie has to take the stand in the Fairfax case a paper trail will show not even credit default swaps were bought against Fairfax's debt (another way they could have bet against the health of the company if they had received advance notice of something rotten in it's balance sheet).
A spokesman for SAC declined to comment on the notion of an SEC investigation for Fairfax trades. Jim Chanos did not return emails requesting comments on what he thought of the Fairfax case or the Reuters story on a forthcoming SEC investigation against Kynikos.
Update: Sources inside of Kynikos Associates say they have not received a Wells Notice nor have they been questioned by the SEC on trades in Fairfax.


Just Kidding About SAC Capital Settling With The SEC

A judge has pumped the brakes on this thing.