Below is a recent article published by securities lawyer Jake Zamansky on Forbes.com (4.4.13)
Hedge fund king Steve Cohen has to be “public enemy number one.”
Last week, one of Cohen’s top lieutenants, Michael Steinberg, was indicted by a federal grand jury on four counts of securities fraud and one count of conspiring to commit securities fraud. The fraud allowed him to pocket $1.4 million in profits, as Kaja Whitehouse reported in the New York Post.
As Whitehouse noted: “The criminal insider-trading probe of hedge-fund giant SAC Capital Advisors is getting awfully close to billionaire founder Steve Cohen.” Steinberg was handcuffed last week by FBI agents at his Park Avenue apartment and then hauled before a judge. He pled not guilty to the charges. If convicted, he faces up to 20 years in prison.
The question regarding Cohen’s future is this: Will the Feds use their mighty resources and show investors that no one is above the law, or will Cohen, the head of SAC, go free without any substantial case brought directly against him, despite charges being brought against many of his senior traders?
In other words, will the same FBI agents soon be using their handcuffs on Cohen? The illegal activity at SAC has been pervasive: at least nine current or former SAC traders and analysts are linked to illegal trades, according to Bloomberg. “That’s a sizable universe of people who could potentially incriminate Cohen,” wrote reporters Patricia Hurtado and David Glovin.
The Fed’s case against SAC has already been questioned. In fact, the federal judge reviewing SAC’s $600 million civil settlement with the Securities and Exchange Commission questioned how the SEC could accept such a large payment without an admission of wrongdoing.
What’s more, days after the settlement, Cohen thumbed his nose at the SEC by buying a $155 million Picasso painting and a $60 million oceanfront Hampton Estate.
The Department of Justice needs to ask whether Cohen should be allowed to occupy the oceanfront house or serve some hard time in the big house.
The Feds will try to build their case against Cohen by getting Steinberg and other hedgies to rat out the king for insider trading and securities fraud. “Cohen has not been charged with any crime, although it has been reported that he is the subject of the FBI probe and that agents may seek to pressure Steinberg to turn on Cohen, who has said neither he nor SAC has done anything wrong,” according to the Post’s Whitehouse.
This is a defining moment for securities enforcement – is the king above the law or is he accountable?
Can the Feds show up to play? Or will they chicken out and concoct some milquetoast settlement that lets the King skate free?
Even the tiny nation of Iceland went after their “bank-sters.” Will our federal prosecutors show the same guts?
The stakes for investors are far too high for the Feds to run away from the case against Cohen and SAC. If the evidence is there, the Department of Justice must prosecute.
Read full article by securities lawyer Jake Zamansky on Forbes.com