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Stevie Cohen: "It's Crying Time Again, I Hear You're Leaving"

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  • Stevie Cohen: "It's Crying Time Again, I Hear You're Leaving"

    Aces and Eights for Stevie Cohen?

    Posted July 24, 2013 By Janet Tavakoli





    Steven Cohen, founder of SAC Capital Advisors LP, may have to defend his firm against criminal charges to be filed later this week, according to the Wall Street Journal. He runs the most successful equity trading firm in the history of hedge funds. At the start of this year he had $15 billion under management and charged his investors 3-and-50 instead of the usual hedge fund gouge of 2-and-20. Questions have swirled around Cohen for years.

    In November, 2003, the Wall Street Journal labeled Cohen, then 47 years-old with only $4 billion under management, a “hypertrader.” At the time his fund gained 40% per year on average, despite his stratospheric performance fees.

    His influence stemmed from his reported boast of paying the highest commissions on Wall Street. Naturally that means he wants “first call” on information. Now the S.E.C. is finally catching up with some questions of its own and asking if Cohen had insider information, as some of his former portfolio managers were alleged to have had.

    As I mentioned in October 2012, Cohen’s defense will probably be that he is a “genius”:

    Steven Cohen’s Defense: I’m a Genius!

    I’m shocked, shocked I tell you, to learn some of my managers used insider information when trading at SAC Capital Advisors LP!

    I suspected it was happening at many of my competitors’ hedge funds. Why? It’s because I’m a genius, and they’re not! Other hedge fund managers apparently think they can achieve my consistent double digit returns when U.S. Treasuries are paying a pittance just because they are taller, or fatter, or better looking than I. But they can’t, because I’m a genius! When they outperform, it’s because they relied on insider information passed on from an analyst they hired from an investment bank or otherwise illegally obtained insider information. When I consistently outperform, it’s because I’m a genius!

    How did I not know allegedly illegally obtained insider information was used by managers at my own fund? Same reason; it’s because I’m a genius. If you don’t get it, it’s because you’re not a genius. But don’t worry. I’ll explain it to you later in this press release.

    I’m a Stand-Up Guy!

    The wonderfulness of me has caused reporters like Patricia Hurtado and Saijel Kishan at Bloomberg News to write some horrible things about the way some of my managers achieved their high returns. Everyone is jealous of my success! But even they had to admit that I’m a fabulously generous guy.

    They quoted Noah Freeman, one of my managers who pleaded guilty to securities fraud and is now cooperating with the FBI, as saying this about some of my firm’s best ideas used for trading in the “Cohen Account”:

    “At SAC Capital you were paid a percentage of Cohen’s trade if Cohen placed a trade based on your tip.” (“Ex-SAC Capital Manager Tells FBI Fund Used Insider Data,” October 1, 2012.)



    Hey, nobody can say I don’t take care of my people! Of course these have to be the best ideas, my name’s on the account, and I’m a financial genius!

    I Couldn’t Have Known

    Yes, I know that five of my current or former portfolio managers or analysts are now implicated in the FBI’s insider trading investigation, but no one should draw the conclusion that I knew they used illegally obtained insider information, knew they provided me tips based on insider information, or traded on the basis of this information. I realize that the less mentally gifted may think I should have been suspicious of consistently high performance and how tips seemed to fall from trees, but that’s only because they’re not as smart as I am.

    You see, when you’re a genius, you can hire people who aren’t as talented, and your genius rubs off on them so that all of your fund managers trade as well as you do and produce double digit returns. I like to think of it as the “Cohen Effect.” It appears some of my managers were too impatient to wait for the greatness of me to rub off on them, so they took matters into their own hands in the wrong way while I was busy managing $14 billion in assets with the help of their tips.

    So you see, there was no reason for me to be suspicious — and I haven’t been accused of any wrongdoing, because I’m a genius!

    but wait . . .


    Investors in Steven Cohen’s SAC May Face Clawbacks

    Posted July 26, 2013 By Janet Tavakoli



    At one time, investors tripped over themselves to become one of the “extractive elite” in SAC. Stevie Cohen could do no wrong, at least if you read mainstream financial news. But that may be due to weak-kneed management in main stream financial media, instead of lack of news of alleged wrongdoing.

    After Cohen’s ex-wife filed a lawsuit including allegations that Cohen engaged in insider trading in the 1980’s, investigative journalist Matthew Goldstein dug further. In late 2009, he wrote a document-based expose that Reuters’ lawyers approved.

    According to an exclusive story by Chris Roush at Talking Biz News, “Cohen repeatedly called Devin Wenig, CEO of the Thomson Reuters Markets Division and the No. 2 executive at Thomson Reuters, to complain.” The multi-billionaire claimed he was being persecuted. Editors at Reuters killed the story.

    The SEC wants Cohen’s “Assets”

    Around 60% of the $15 billion SAC managed belonged to Cohen and his managers. That’s what a 3-and-50 fee structure will do for a fellow. Of course, now, all of those assets are up for grabs by the S.E.C. That’s what insider trading allegations will do.

    Last week, the SEC brought civil charges against Cohen for “failure to supervise,” and Cohen may face additional future charges.

    Cohen’s Investors: Blackstone, Funds of Funds, and Individuals.

    Matt Goldstein followed the saga of Cohen’s investors as they abandoned ship. Cohen’s largest outside investor was The Blackstone Group with around $550 million invested. Other investors included Citi’s private bank, a fund of funds managed at Morgan Stanley, HSBC, Skybridge Capital, and high net worth individuals.

    Fund managers that invested with SAC must be quacking in their Gucci’s. Investors paid them high fees and expected them to perform first-class due diligence before placing funds under Cohen’s management. Yet serious questions have swirled around Cohen’s trading practices for more than a decade.

    SEC Slaps SAC with Insider Trading Charges

    Now that Stevie Cohen’s “No. 1 goal is not getting personally indicted” for insider trading, where does that leave his investors?
    If the SEC can prove its case and find that SAC’s gains were the result of a criminal activity, investors will likely face clawbacks.

    If investors accessed SAC through a fund of funds or a multi-advisor fund, they will likely sue the managers of those funds.
    The SEC alleges that insider trading resulted in “hundreds of millions” of dollars in illegal profits.

    SEC: Where are the Other Indictments?

    Unfortunately for SAC investors, the SEC’s lawyers seem to vigorously pursue insider trading, because they can grasp it. But the SEC still have to prove its case. If the allegations are true, there’s still a chance of acquittal due to incompetent lawyering: trial by email instead of doing the hard work of investigating and explaining facts to a jury until it can grasp the essentials. The game’s not over.

    But the “smart money” made illegal gains by committing crimes that are difficult for the SEC’s lawyers to understand: crimes related to credit derivatives, commodities trading, collateralized debt obligations, and much more. The SEC has yet to effectively investigate, much less prosecute, widespread massive fraud in the financial system.

    http://www.tavakolistructuredfinance...ace-clawbacks/
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