Hedge Funds

Prosecutors suggest settling insider trading case against SAC

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Lawyers for the hedge fund SAC Capital and the U.S. Attorney for Manhattan's Southern District last week held their first sit-down meeting since before SAC was indicted on insider trading charges, said someone familiar with the matter—this time to discuss a potential settlement of the case.

The group met at prosecutors' suggestion, said this person, to broach in person the possibility of settling the charges against the hedge fund, filed July 25 in federal court. While settlement talks are at an early stage and any deal could still be weeks, or even months, away, this person added, it marks the most encouraging sign yet for the embattled SAC that it could resolve the Justice Department's investigation and continue operating as an independent hedge fund.

In the government's eyes, a settlement fee would likely have to be at least $1 billion, said several people familiar with the Manhattan U.S. Attorney's position, and perhaps even double that. For SAC, however, the ideal number would no doubt be lower—and would also count the $616 million the hedge fund paid the Securities and Exchange Commission to resolve civil insider-trading charges earlier this year as part of it.

Spokespeople for both the U.S. Attorney's office and SAC declined to comment.

In a brief court hearing Tuesday afternoon, U.S. District Judge Laura Taylor Swain granted SAC's lawyers additional time to review what they described in court as an "enormous" amount of case material before an anticipated trial begins. (Lawyers for both sides will meet with the judge again on Dec. 20.)

Separately, the trial of former SAC analyst Mathew Martoma, who stands accused of using insider information on a drug trial to generate ill-gotten gains of some $276 million, was postponed to January (from an original start date of November).

Despite the legal clouds looming over it, SAC and its founder, Steve Cohen, have tried arduously to maintain a business-as-usual atmosphere for its 1,000-person staff.

In recent office gatherings, firm leaders have resisted the notion that the fund would turn in to a "family office," managing only money belonging to Cohen and his employees, said participants in those meetings. SAC brass have also said they will provide extra compensation for traders and analysts who stay on board in the coming year.

In recent staff discussions about the insider-trading suits, SAC President Tom Conheeney has indicated the firm's desire to settle the corporate insider-trading charges, participants said. But Conheeney said in those same talks that it might be hard to do so before the first quarter of 2014, those people added.

SAC's primary hedge fund is up about 13 percent so far this year, according to a person familiar with its performance.

—By CNBC's Kate Kelly. Jim Forkin contributed to this report.