The cast of characters ranges from a former beauty queen to an ex-Goldman Sachs Group Inc. board member, from a former top executive at International Business Machines Corp. to lawyers and a medical doctor. The probe has resulted in prison sentences, a suicide and a fugitive on the run in India. At least four multibillion-dollar hedge funds closed. SAC, which managed $16.5 billion at its peak in 2007, is the biggest of the firms to be caught up in the government probe.
Cohen, who once described insider-trading laws as “very vague,” still faces an administrative action filed by the SEC for his alleged failure to supervise the hedge fund’s activities. And while a judge has signed off SAC’s March settlement with the agency, the agreement is pending approval of a separate case unrelated to SAC.
While speculation has long circulated that Cohen’s returns could only be the result of access to illegal inside information, the government didn’t start focusing on SAC in earnest until 2006 while it was investigating Raj Rajaratnam, who ran Galleon Group, a New York-based hedge fund. Even as B.J. Kang, the lead FBI agent on the case, pursued the Sri Lankan native, now serving 11 years in prison for insider trading, he continually questioned witnesses about wrongdoing at SAC, Bloomberg Markets reported in 2010.
Throughout the government probe, SAC’s name kept surfacing. At least 11 current and former SAC employees have been linked to insider trading while at the firm, including six who have pleaded guilty. Last November, a former SAC money manager, Mathew Martoma, was charged in what prosecutors called the biggest insider-trading scheme in history.
Martoma allegedly used illegal tips from doctors about an Alzheimer’s drug trial to help SAC make profits or avoid losses totaling $276 million by trading shares in Elan Corp. and Wyeth LLC. He’s scheduled to go on trial in January.
Cohen has never been part of the hedge-fund social clique, even with his 14-acre estate in Greenwich, Connecticut, and extensive art collection that includes works by Pablo Picasso and Andy Warhol. He rarely appears at charity or social events where the rich congregate. Friends and co-workers describe him as shy, preferring to spend his time with family and a handful of friends.
The third of eight children, Cohen grew up in a middle- class family in Great Neck, a village on New York’s Long Island. His father was a dress manufacturer and his mother a piano teacher.
Competing with seven siblings wasn’t easy for Cohen, even though he got good grades in high school and was a star soccer player. His mother said he’d have done better in a family with two kids, according to a 2010 article in New York magazine. Cohen told the Wall Street Journal in 2006 that his mother thought him lazy and smart, and considered his younger brother, an accountant, the financial whiz of the family.