Steve Cohen being Charged

labrea_gwJuly 19, 2013

The Securities and Exchange Commission announced charges Friday against hedge-fund mogul Steven Cohen, accusing him of failing to supervise employees who engaged in insider trading.

Now SAC looked like it was getting off easy back in May when it agreed to pay $600 Million in fines but without admitting any wrong doing. Those fines would have been tax deductible also according to Forbes and no one goes to jail everyone can continue trading. (maybe)

""Hedge fund managers are responsible for exercising appropriate supervision over their employees to ensure that their firms comply with the securities laws," Andrew Ceresney, co-director of the SEC's enforcement division, said in a statement. "After learning about red flags indicating potential insider trading by his employees, Steven Cohen allegedly failed to follow up to prevent violations of the law.""

Ah well it's worth a shot for another couple of bucks!
(Trivia side note)
Steve Cohen was a major donor to Marriage Equality in NY
"What’s interesting is in the complaint against him the SEC published some instant messages between analysts and Cohen discussing whether or not former portfolio manager Mathew Martoma had information he shouldn’t have been able to get"

A trial for Martoma should begin in November as well as
a trial of SAC fund manager Michael Steinberg, the most senior executive from the firm to be indicted on insider trading charges, his trial starts on November 18.

Here is a link that might be useful: ah the instant message

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Cohen being charged with "failure to supervise" seems pretty innocuous. I'm not a lawyer nor do I play one on TV, but I believe even I could have come up with a bit more.

If this scrutiny of SAC Capital is part of a broader look into insider trading on Wall Street, why did the SEC stop short?

This guy can't even use the "Schultz Defense".

    Bookmark   July 19, 2013 at 4:34PM
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The SEC is seeking a lifetime ban from him managing investor funds. For Cohen that is huge. But in any case I will reserve feeling sorry for him since he has approx. $9 billion to fall back on plus one of the largest art collections in the world.

    Bookmark   July 19, 2013 at 6:02PM
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My guess is that a lot more of this goes on behind closed doors than the public is made aware of, and only the occasional inside trading is found out... gamblers would always prefer to hedge their bets if possible.

What's odd, though, is that they aren't required to admit any wrongdoing... and no one seems to ever do any time in punishment for breaking these laws.

    Bookmark   July 19, 2013 at 6:04PM
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Well if they could have gotten him with more they would have back when the company agreed to pay the fine but admitted no wrong doing.

Looks like someone might be singing for their supper with the uncovering of these instant messages .
Being able to bring any form of charges is a desirable position to work from with the other 2 trials proceeding evidence may become competitive as well as bargaining positions for that evidence!

    Bookmark   July 19, 2013 at 7:50PM
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If Cohen is banned from managing other people's money, you've really got a "yawn". Much of the assets are his; well, 9 billion out of the SAC firm's managed 15 billion anyway.

Despite all failed efforts to tie him to insider trading, methinks if the SEC considers banning Cohen to be a win, why in the world would the SEC be an agency anyone would fear?

    Bookmark   July 19, 2013 at 11:36PM
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There are other ramifications for Cohen if he is found guilty. Among other things this will be detrimental to Cohen's huge ego and he could become a pariah in the social circles and society which is important to someone like Cohen. He could also loose his stake in Sotheby's, his positions on the boards of Brown University, LA MOCA, Robin Hood Foundation and others, all very important to him and his status. There are some that don't care and carry on well, some even bounce back eventually and reinvent themselves somewhat, like Milken, but most don't and Cohen is well known for his ego. He has a lot more to loose besides his standing in the financial community and his business.

He was also founding a private art museum (I am not sure of the status) that can be detrimentally affected as well as his contacts in other ventures. There are many in that world (society/art/culture) that don't want to be associated with people like him and people like Cohen don't like to be shunned by those they want to retain their connections to.

This post was edited by epiphyticlvr on Sat, Jul 20, 13 at 1:17

    Bookmark   July 20, 2013 at 12:43AM
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Been reading around on his art connections - seems he amassed a tidy collection of Manet, Monet, Pollock, Warhol, etc. in a scant handful of years.

Some in the art world consider his situation very troubling, but then there's this: "I don’t mean to sound cavalier but there is this sense at this point that this is much ado about nothing,” says Todd Levin of the Levin Art Group, an art consulting firm. “If there were actual allegations by the S.E.C. and those turned into actual charges and if it actually went to trial, then we’d have something to talk about. Until then, I don’t think anyone is paying attention to this.”

It'll be interesting to see what fallout there might be.

    Bookmark   July 20, 2013 at 1:34AM
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Been reading around on his art connections - seems he amassed a tidy collection of Manet, Monet, Pollock, Warhol, etc. in a scant handful of years.

Indeed. He is among the top 10 collectors in the world and is a force to be reckoned with. He amassed an amazing collection of impressionist, modern and contemporary art including what is considered trophy art that includes Pollack.Hirst, Monet, Munch and Picasso among others. He just spent $100k replacing the Hirst shark that was disintegrating and it wasn't long ago that was appointed to the board of MOCA, some of this while he has been under investigation.

This isn't his first goat rodeo in scandal but it might be the biggest. He has made some important enemies so this may be just the ammunition they need to exclude him from things that are important to him.

    Bookmark   July 20, 2013 at 2:06AM
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It would be interesting to see how a business is willing to cough up $600 Million in just go away money without being guilty! The Gubmint used to just take the money in the game of Catch me if you can and for the most part leave it at that.

Now in June Forbes ran an interesting article of the conviction of Todd Newman that claimed if he was guilty then nearly all hedge fund traders were guilty!

"What is not in dispute in this case is that a group of four analysts who worked for four different funds have admitted that they each obtained, handled and distributed confidential information from publicly traded companies. The group was formed by Jesse Totora (Diamondback), Jon Horvath (SAC), Sam Adondakis (Level Global), and Danny Kuo (Whittier Trust). This group of educated, well paid analysts worked in the high pressure world of creating financial models and gathering information to feed to their respective portfolio managers who would then trade on that intelligence. Each one knew that the information they would provide could mean the difference between a huge bonus, or being fired … they also knew that it could be a ticket running their own portfolio. So this group of friends formed a tight-knit circle to share information from their various contacts at high tech companies like Dell DELL +0.15% and Nvidia NVDA -2.13%. Contacts who worked at those firms but were further down the financial food chain … contacts who aspired to be analysts in the hedge fund world.

The young men formed a “Fight Club” mentality with one email amongst the group stating that, “Rule #1 about our e-mail list, there is no e-mail list”. Information containing insider/confidential information was exchanged in emails, phone calls and text messages, and they in turn incorporated that information into their data feeds to the portfolio managers. All of this is a matter of fact, because each of the men pleaded guilty to crimes that will, at the very least, earn them a felony charge if not prison. The reason it may not earn them prison time is that their cooperation led authorities to higher-level players that garner more headlines than analysts talking tough on emails; portfolio managers. One of those was Todd Newman at Diamondback.'

Jesse Tortora was hired by Diamondback as an analyst in September 2007 to work for Newman. Newman’s day would start in his Stamford, CT office by looking at 500+ emails with data he would need to make his trades for the day, many from sell side brokers like Goldman Sachs and Morgan Stanley MS -0.36%. His expertise was in publicly traded high tech companies (computers, semi-conductors and component suppliers) and technology companies which have a big supply chain to monitor. If one follows the component suppliers, like semiconductors, all the way through to the distributors and OEMs that sell the products, there is a narrative that develops on which to base one’s trades. At any given time, he was watching over 200 stocks … then he would hit the phones.

He would speak to Diamondback analysts (including Tortora), other portfolio managers, call company executives, talk with major investment house analysts …. and all the time he was making trades based on the information he gathered along the way. It was an exhausting job, but it paid well. For the years 2007 through 2009, Newman made about $3.5 million/year. Tortora did not do too badly either, earning about $2 million in 2008 (his best year).

Totora’s job was to develop models that would predict a stock’s price based on information he gathered. He was not just developing spreadsheets, he was talking to Investor Relations people, executives, attending conferences, reading reports and, getting information from the ‘Fight Club.’ All that information was then gathered, filtered and presented to Newman … sometimes in real-time. That was the job.

So out of all the stocks that Newman was trading and all of the information he was receiving, the government’s case boiled down to the trading of a few stocks around the release of earnings on Dell and Nvidia. The case broke when the FBI approached Sam Adondakis (Level Global) on October 14, 2010. He was not very forthcoming with the agents at first, probably because he was in shock, but quickly realized that he needed to cooperate to save his own ass (just the way it works). A few weeks later, he was recording calls for the FBI with the first one being to his friend and co-conspirator, Jesse Tortora (so much for the ‘Fight Club’ creed). The conversation quickly turned to their own misdeeds. Once the FBI had Tortora on tape, they approached him at his parent’s home where he had been living. He too quickly wanted to cooperate, but his incentive to cooperate went further than him avoiding jail … he had been passing stock tips to his retired step-father Marshall Ingel … a guy he did not want to see in jail either. Ingel was never charged criminally, or civilly, for well-timed trades he made in Dell Computer and Nvidia … the same trades made by Newman at Diamondback.

Here is a link that might be useful: On the inside of the insider

    Bookmark   July 20, 2013 at 10:24AM
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