Issue of the week: The feds home in on Steven Cohen

last updated 8 January 2015

Hedge-fund giant Steven Cohen is in the feds’ crosshairs, said Patricia Hurtado and Katherine Burton in Bloomberg.com. U.S. Attorney Preet Bharara has extracted guilty pleas from several former employees of Cohen’s $13 billion SAC Capital, and that could lead to ominous consequences for Cohen himself. Two former traders, Noah Freeman and Donald Longueuil, have confessed to insider trading while working for SAC. Some of their ill-gotten stocks may have ended up in an account Cohen set up to capture “the best trading ideas unearthed” by his traders, who are free to pursue their own strategies and are richly rewarded when they pan out. For now, “Cohen probably has nothing to worry about,” said John Carney in CNBC.com. Even if Longueuil and Freeman bought tainted stocks for Cohen’s account, prosecutors still have to prove that he knew they had been purchased after “illegal tips.” Still, I’m sure Cohen “would very much like to stop seeing SAC Capital in the same headlines as the phrase ‘illegal trading.’”

Maybe so, but it clearly takes more than a measly insider-trading investigation to keep Cohen from living large, said Peter Lattman and Andrew Ross Sorkin in The New York Times. Last week, the once-secretive hedge-fund operator attended a gala at New York’s Metropolitan Museum of Art, where he “rubbed elbows with the rock star Mick Jagger and the quarterback Tom Brady.” Earlier this year he attended his first World Economic Forum in Davos, Switzerland, where he was seen “dancing the night away at a private party.” In December, at the Basel art fair, he dropped $300,000 on two artworks in five minutes—pocket change for Cohen, whose $8 billion net worth earns him the No. 35 spot on Forbes magazine’s U.S. rich list. And he’s bidding to buy 49 percent of the New York Mets from their financially beleaguered owners. That’s hardly the behavior one would expect from a man who feels the hot breath of federal prosecutors on his neck.

As a fan of the hapless Mets, I’m rooting for Cohen to escape prosecution, said Stephen Taub in Institutional Investor. “Just think of the possibilities if the Mets were owned by one of the most aggressive stock market traders around.” He’d hire “a crack code breaker” to steal opposing teams’ signs. He’d swing “high-profile trades involving unlikely individuals.” And if a big-ticket player failed to perform, Cohen wouldn’t “stubbornly hang on to him to save face.” In fact, as one of “the biggest control people on this planet,” Cohen is unlikely to stop with a minority stake in the franchise; he’ll want to go all the way. Hey, a Mets fan can dream, can’t he?