Since he started his hedge fund, Cohen has achieved average annual returns of 30 percent, with just one money-losing year: 2008, when his main fund tumbled 19 percent.
SEC Action
The SEC, in its administrative action on July 19, accused Cohen of failing to supervise two portfolio managers who both face insider trading charges.
While the agency stopped short of accusing Cohen of insider trading himself, the SEC alleged he received “highly suspicious” information and ignored “red flags” that should have caused any reasonable hedge-fund manager to investigate the basis for trades made by SAC employees Mathew Martoma and Michael Steinberg. Those trades helped the hedge fund earn profits and avoided losses of more than $275 million in 2008, the SEC said.
Martoma, 39, was charged in November by Bharara as part of the most lucrative insider trading case in history. Prosecutors said Martoma helped SAC reap hundreds of millions of dollars in illegal profits on tips provided by a doctor about a clinical trial about an Alzheimer’s drug being developed by Wyeth LLC and Elan Corp.
Pleaded Guilty
Martoma, who has pleaded not guilty, is scheduled to go to trial in Manhattan federal court on Nov. 4.
While Cohen wasn’t charged with Martoma, that case was the first to link Cohen directly to alleged inside information.
According to the U.S., Martoma learned on July 17, 2008, that test results of an experimental Alzheimer’s treatment from Dublin-based Elan and Madison, New Jersey-based Wyeth were worse than the market anticipated, and that those results would be made public at the end of that month.
Prosecutors said that on July 20 of that year, Martoma e- mailed the “hedge fund owner,” otherwise unidentified in last year’s indictment, stating it was “important” that they talk. Martoma said he was no longer “comfortable” with the fund’s long position on the two stocks.