Hedge Fund Billionaire Leon Cooperman Settles With SEC On Insider Trading Charges
When the Securities and Exchange Commission leveled insider trading charges against hedge fund billionaire Leon Cooperman in September 2016 for his trades in a company called Atlas Pipeline, some expected it would end to one of Wall Street’s most storied careers. Cooperman, a former Goldman Sachs partner, helped create the firm’s over $1 trillion asset management business and then left in 1991 to start hedge fund Omega Advisors, becoming a billionaire and managing assets that peaked at nearly $10 billion.
The SEC had offered Cooperman the opportunity to settle charges if he agreed to a five-year industry ban, but he instead chose to contest the charges, vowing in public appearances to fight to keep his reputation intact after roughly 50 years on Wall Street. Now, just months before the insider trading case was set to move to trial, it appears Cooperman has triumphed.
On Thursday evening, documents in a Pennsylvania court show Cooperman has settled the insider trading case with the SEC without admitting wrongdoing or agreeing any industry bar. As part of the settlement, which still has to be approved by courts, Cooperman will fork over a total of $4.9 million in fines and penalties and agree to an have an independent compliance monitor at his fund. Importantly, the settlement means Cooperman’s hedge fund, Omega Advisors, will be able to stay in business and potentially even seek new outside funds. Presently, Omega manages some $3.6 billion in assets, most of it being Cooperman’s own money after heavy investor redemptions, some of it due to the SEC’s case.
“I look forward to putting this matter behind me, with no restriction on my ability to invest and manage client assets, for much less than it would have cost to continue defending the case,” Cooperman said in an emailed statement.
In a letter to investors obtained by FORBES, Cooperman characterized the settlement amount as a small fraction of his potential legal fees had he succeeded in beating the case at trial. Omega will not charge investors any money for the settlement, the letter noted and Cooperman is now planning on getting back to business. “As always, my top priority is managing client money and delivering superior risk-adjusted returns for our investors. I have never lost my focus on that commitment, and never will,” he said.
About the settlement, the SEC said in a statement, it “protects against future violations while requiring Cooperman and Omega Advisors to pay significant fines for their misconduct. By imposing an independent consultant to monitor their trading activity, the resolution helps protect our markets from future risk of insider trading.”
The SEC’s insider trading charges centered around trades Cooperman made in Atlas Pipeline in the summer of 2010. The regulator alleged Cooperman added to his holding in Atlas after he learned of its plans to sell a pipeline asset from a company executive. When the asset sale occurred Atlas shares surged and netted Cooperman a multi-million dollar paper profit. The SEC claimed Cooperman received the information after vowing not to trade on it, a point Cooperman denied. He also characterized the trades as balancing Omega’s ownership in Atlas because some funds had been underweight the stock. Omega continued to buy Atlas stock after the asset sale and only began selling months later. Ultimately, Atlas proved to be a poor investment and Cooperman exited the investment for a substantial loss in 2015.
Cooperman, worth $3 billion according to the 2017 FORBES billionaires list, posted strong performance in 2016 despite the distraction of the SEC’s sanction. His equity and credit funds rose roughly 10% due to savvy trades in distressed credit at the beginning of the year and an end-of-year rally in value stocks after President Trump was elected. Cooperman made FORBES’ list of the top-25 highest earning hedge fund managers, earning an estimated $150 million.