US attorney says SAC "magnet for cheaters" US prosecutors brought criminal charges against SAC Capital alleging the $14bn hedge fund run by Steven Cohen engaged in "rampant insider trading" for more than a decade. SAC was charged with one count of wire fraud and four counts of securities fraud. Using the government's powers to seek any monies made from the allegedly illegal activities, prosecutors may seek as much as $10bn, a person familiar with the matter said. The criminal indictment, the first against a hedge fund in recent memory, details an expansive scheme alleging Mr Cohen incentivised employees to send "high conviction" ideas to give the fund manager an "edge" over other investors. The case involved "what can only be described as rampant insider trading," Preet Bharara, the US attorney in the Southern District of New York said at a press conference in New York. It was "substantial, pervasive and on a scale without known precedent in the history of hedge funds." SAC became ... a veritable magnet for market cheaters. FBI assistant director George Venizelos added: "To be blunt, SAC - through the actions and inactions of its management - not only tolerated cheating, it encouraged it." "The SAC compliance department was like the embodiment of the phrase, "See no evil. Hear no evil. Speak no evil."" SAC said in response that it had "never encouraged, promoted or tolerated insider trading and takes its compliance and management obligations seriously." The handful of men who admit they broke the law does not reflect the honesty, integrity and character of the thousands of men and women who have worked at SAC over the past 21 years. SAC will continue to operate as we work through these matters," it said in a statement. Mr Cohen, who formed the hedge fund with $25m in 1992 and grew it into a $15bn enterprise at its peak, funding his elaborate modern art collection and properties, was not charged with any wrongdoing. The indictment revealed that Richard Lee, a portfolio manager at SAC at various periods between 2009 until March 2013, pleaded guilty on Tuesday to conspiracy and securities fraud. Mr Lee admitted to trading shares of Yahoo and 3Com based on inside information while at SAC. He is co-operating with the authorities. Mr Cohen allegedly overruled the firm's legal department which advised against hiring Mr Lee. Mr Cohen was warned by an employee of Citadel - referred to in the indictment as "hedge fund A" - that Mr Lee was known for being part of that hedge fund's "insider trading group," according to the indictment. SAC hired Mr Lee in April 2009 and he proceeded to trade based on inside information, the indictment said. A Citadel spokesperson said that Mr Lee was employed from 2006 to 2008 in its Principle Strategies group, which traded around merger and acquisitions activity. In 2008 he was transitioning to take charge of that group, and in the process of a few days we discovered violations of policies that were unrelated to insider trading, but were nonetheless violations, and he was terminated. A person familiar with the firm said that the violations were related to record keeping, and that the Principle Strategies group was disbanded soon after as corporate activity dried up due to the financial crisis. Richard Lee has accepted responsibility for his prior conduct. He is co-operating with the government and looks forward to moving past this episode in this life," said his attorney, Christopher Clark. The criminal charges are a blow to SAC and send a message to the hedge fund community, which has been turned inside out by the expansive insider trading investigation that has resulted in convictions of Raj Rajaratnam, the founder of Galleon Group, and Rajat Gupta, the former head of McKinsey and Goldman Sachs board director. In total 81 individuals have been charged with insider trading since 2009 when Mr Bharara became US attorney in Manhattan. SAC is the only firm to be indicted in the recent sweep. In March SAC paid $616m to settle civil charges with the Securities and Exchange Commission. The SEC filed an administrative action against Mr Cohen on Friday alleging he failed to prevent his employees from engaging in insider trading. He has denied any wrongdoing. Prosecutors allege SAC hired employees it believed had "an edge." In one example a candidate was described as "the guy who knows the quarters cold, has a share house in the Hamptons with the CFO" of a Fortune 100 industrial company, according to the indictment. SAC used computer systems, designated voicemail and email to collect trading ideas, according to the indictment. The firm also had a compliance program that "failed to detect or thwart" insider trading, the indictment alleges. Instant messages and emails not specifically saved were purged after 30 days. Compliance department investigations into allegations of insider trading were "weak" and focused on confirming with the employee that an email implying inside information was "inartfully drafted," the indictment alleges. The indictment is built on the co-operation of several former SAC employees who have pleaded guilty and agreed to co-operate with the SEC, Federal Bureau of Investigation and prosecutors. Banks that provide credit and trading facilities to SAC were assessing their counterparty risk to the hedge fund on Thursday, deciding whether to keep it as a client. "I think it's difficult when you get an indictment," said one banker. Others said there were no immediate plans to suspend prime brokerage services: "innocent until proven guilty," said two different bankers. SAC has a wide range of prime brokers and bank counterparties, including Goldman Sachs, Morgan Stanley, JPMorgan Chase and Deutsche Bank, which declined to comment. That has become typical practice since the financial crisis when hedge funds became concerned about the damage to them of a bank failure. Some bankers said they were reassured by a cash pile estimated to be in the billions of dollars and drew a distinction between the credit risk of a well-capitalised SAC and Long-Term Capital Management, the hedge fund that imploded in 1998 and spread contagion throughout the financial system. However, one said that it was not without counterparty risk and the different exposures through derivatives were complicated. Grey skies and unseasonably cool weather hung over the SAC's headquarters in Stamford, Connecticut, where access was blocked to the public on Thursday, as the authorities held their press conference in New York. The only road leading to SAC's office park was open but manned by private security guards, with a stop sign positioned in the middle of the street. Additional reporting by Jason Abbruzzese