Wall Street firm Jefferies is providing major backing to a former senior SAC Capital Advisors executive despite its own struggle with insider trading at an internal hedge fund.
On Friday, public conglomerate Leucadia National Corp., which bought $43 billion New York-based investment bank Jefferies in November 2012, announced plans to invest $400 million in Folger Hill Asset Management and that CEO Richard Handler and President Brian Friedman would join the new hedge fund's board of managers.
Set for launch in early 2015, Folger Hill is led by Sol Kumin, who was chief operating officer of Steve Cohen's SAC from 2008 to January 2014. Kumin, who helped develop the firm's international offices and recruit its many traders, was never accused of wrongdoing during his tenure at SAC since 2005. But the firm pleaded guilty last year to criminal insider trading, and eight employees were convicted or pleaded guilty to similar charges. SAC is now a family office for billionaire Cohen and renamed to Point72 Asset Management.
Jefferies made the Folger Hill investment despite one high profile brush with insider trading. The co-portfolio manager of an internal hedge fund, Joseph Contorinis, is serving a six-year federal prison term in West Virginia for making millions of dollars based on nonpublic information about supermarket company Albertsons leaked to him by a UBS banker in 2005 and 2006. He was found guilty in 2010.
The Jefferies Paragon Fund was co-managed with Contorinis by then-CEO Handler's brother Michael, who was never accused of wrongdoing. Michael Handler had been an SAC portfolio manager before joining Jefferies. The then-$70 million Paragon fund was liquidated in June 2007 and Michael Handler is now in public service as the director of administration for the city of Stamford, Conn.