This past March two affiliated entities of Wall Street’s largest hedge fund whale, Steven A. Cohen, forked over a cool $616 million in fines to the SEC to settle insider trading allegations.
At the time, the firm tried to put the typical spin on this situation and offered that it was continuing to assist with the ongoing investigation. My gut instincts tell me that both Cohen and the firm believed that the $600+ million was the “stay out of jail” card for Cohen himself and the green light for the firm to continue business. Two months later, the “can’t we all be friends” approach took a dramatic change as SAC said that it would no longer cooperate.
Fast forward another two months and this week we witness an indictment of the firm, although not of Cohen himself. (Come on, paying $600 million has to get you something, right?)
What does the Fed’s indictment of SAC mean? Hopefully it means we will get an unvarnished view of the truth as to what really transpired within SAC, although I am not so sure that will happen. Why so?
I believe that Cohen himself, the firm as a whole, and the industry at large realize that they have even more to lose by allowing real transparency in regard to the insider trading allegations and the failure to supervise.
What does the indictment mean? Both clients and counterparties will shun SAC like the plague. In the process, the firm is “most likely done.” Former IG of the TARP, Neil Barofsky, makes that same assessment in this recent 6-minute Bloomberg clip.
What about co-conspirators outside of SAC, though? Especially those within large Wall Street firms that generated untold millions in fees and commissions while conveniently looking the other way as SAC engaged in what many in the industry believe has been a longstanding practice of insider trading?
Will this story ever be fully told?