SEC Goes After White Whale, Billionaire Steve Cohen, With Lame Charge
The Securities and Exchange Commission has (finally!) gone and done it. The agency filed charges today against Steve Cohen, the audacious, art-collecting billionaire founder of SAC Capital, a $15 billion Greenwich hedge fund.
A release from the SEC accuses Cohen, one of the most high-profile titans of finance, of failure "to supervise two senior employees and prevent them from insider trading under his watch." SAC Capital has already (happily!) agreed to settle for more than $615 million in fines related to alleged insider trading. But now the SEC's Enforcement Division is also "seeking to bar Cohen from overseeing investor funds.”
Failure to babysit is hardly the harpoon U.S. Attorney Preet Bharara was hoping to spear Cohen with. Back in 2006, federal regulators began a "far-reaching probe of insider trading among hedge funds" that "circled ever closer to Cohen," spurred by the belief that SAC couldn't have have come by impossibly high returns—especially through decades of economic turmoil—honestly.
As Vanity Fair reported last month:
One by one, Bharara has picked off onetime SAC traders and analysts, confronting them at their homes, pulling them before grand juries, bringing criminal cases, and pressing them for evidence that Cohen has broken insider-trading laws. So far Cohen has not been charged with anything, but there is the same sense that Bharara, like Giuliani before him, has too much invested in all this to lose. “If Steve Cohen gets off,” one hedge-fund manager observes, “he will be the O. J. Simpson of insider trading.”
With all that build-up, the reaction to today's charge from industry observers is a uniform cry of: That's the best you can do?
After all that, Steve Cohen gets accused of "failing to oversee"? Clear who won that one. http://t.co/5BODemTTaM
— Henry Blodget (@hblodget) July 19, 2013
Those who can, sue for insider trading. Those who can't, sue for failure to supervise.
— Kevin Roose (@kevinroose) July 19, 2013
Stevie Cohen to SEC: "Lol."
— Ben White (@morningmoneyben) July 19, 2013
Cohen, whose bitter 2010 divorce also included insider trading allegations from his ex-wife, seems about as fazed as when he bought a $155 million Picasso and a $60 million Hamptons house the same week that he agreed to pay a $600 million fine.
SEC to force Steve Cohen to retire to his 40 acre mansion, pay fines that cost less than his lunch.
— Cullen Roche (@cullenroche) July 19, 2013
In response to the charges, SAC issued the following statement:
"The S.E.C.'s administrative proceeding has no merit. Steve Cohen acted appropriately at all times and will fight this charge vigorously. The S.E.C. ignores SAC's exceptional supervisory structure, its extensive compliance policies and procedures, and Steve Cohen's strong support for SAC's compliance program."
According to the SEC, these alleged insider trading charges, which were related to securities for Dell and two pharmaceutical companies (Elan and Wyeth), were able to help Cohen’s hedge funds earn profits and avoid losses of more than $275 million.
In case you're keeping track at home, that's 0.039 percent of the $700 billion bailout taxpayers gave Wall Street.
SEC Charge Against Steve Cohen (PDF)
SEC Charge Against Steve Cohen (Text)