Hoping to boost surveillance in the wake of numerous insider-trading investigations that ultimately ended its life as a public hedge fund, SAC Capital has hired a Silicon Valley data miner that has done work for the Central Intelligence Agency and the Federal Bureau of Investigation in order to keep closer tabs on its own employees.
In a memo issued to employees Wednesday afternoon, SAC President Tom Conheeney announced the hiring of Palantir Technologies, a closely held Palo Alto, Calif., company that specializes in crunching data for large institutions.
"Palantir's analytics give us a powerful new tool for our compliance and surveillance team and we have also found promising uses for our due diligence and hiring teams," Conheeney wrote. "This innovative approach will further help protect us from information and people that could potentially taint the firm."
(Read more: And so they go: SAC loses two more star traders )
As part of a $1.2 billion settlement with the Justice Department last year over accusations that the firm tolerated and even encouraged improper trading, SAC has returned nearly all its public investment capital and laid the groundwork to become a so-called family office, managing between $9 billion and $10 billion belonging to its founder, Steve Cohen , and select relatives and employees.
The new company, whose prominent stock-investing arm has been renamed Point72, will officially open April 7-even as the trading firm awaits a judge's final approval of the settlement agreement.
What SAC's roughly 850 employees will make of the enhanced monitoring programs is not yet clear. So far this year, about a half-dozen investment management employees have left the firm, a rate of turnover the company describes as well in line with that of prior years.
(Read more: Battered SAC Capital morphs into Point72 )
But knowing that their phones, computers and other communication devices may be heavily scrutinized by the firm may come as a turnoff to workers already feeling pressured by the negative publicity surrounding their employer.
Of course, that surveillance is already underway. As part of a pilot program first discussed nine months ago, Conheeney wrote, Palantir was able to "embed" with SAC's compliance team and run a temporary monitoring project. That pilot was a "success," the firm president added, leading to the data miner's hiring.
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Palantir, which generates revenue of some $500 million, has a blue-chip history both in the tech business and on Wall Street.
Capitalized by investors like Peter Thiel , the PayPal co-founder, the revered former hedge fund manager Stanley Druckenmiller and the In-Q-Tel venture fund run by the CIA, its past clients have included JPMorgan Chase (JPM), Morgan Stanley (MS) and the Defense Department.
-By CNBC's Kate Kelly. Follow her on Twitter @KateKellyCNBC.
- Private Equity & Hedge Funds
- SAC Capital
- Central Intelligence Agency
- Palantir Technologies