Issue of the week: Gunning for a hedge fund mogul

The feds are finally closing in on legendary hedge fund boss Steven Cohen.

The feds are finally closing in on legendary hedge fund boss Steven Cohen, said Aaron Smith in CNNMoney.com. For years, the government has been trying to build an insider-trading case against the 56-year-old billionaire, one of Wall Street’s most revered and feared traders. Last week, prosecutors got “a bit closer to their prize.” They charged one of his former portfolio managers, Mathew Martoma, with a $276 million insider-trading scheme, the largest such case ever prosecuted. Martoma is now the seventh current or former employee of Cohen to have been implicated in dirty deals, said Kevin Roose in NYMag.com. While the feds’ earlier attempts to link Cohen to wrongdoing failed, the facts of this latest case suggest that his “plausible deniability window is shrinking.”

Prosecutors clearly hope Martoma will flip on his former boss, said Peter Lattman and Peter J. Henning in The New York Times. The 38-year-old is charged with obtaining secret data from a doctor about a problematic Alzheimer’s drug, and then acting on that information by unloading the drugmakers’ stocks and even betting against them to reap hundreds of millions of dollars. The feds have suggested that Cohen approved of Martoma’s actions and that he traded on the secret information. But the evidence is circumstantial, and it would be “difficult for a jury to infer anything incriminating just from the way these trades were executed.” Prosecutors have so far failed to persuade Martoma to take the stand against Cohen, said Michael Rothfeld and Chad Bray in The Wall Street Journal. But now that the father of three young children faces up to 19 years in prison, reality may be sinking in. Until he was arrested last week, Martoma didn’t know that the doctor in the case had agreed to cooperate against him, and that fact could add pressure on him to strike a deal.

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