Scandal puts $14B hedge fund empire at risk
Cohen's hedge fund manages $14 billion in assets. His own net worth is more than $8 billion. He's bought Picassos, Monets and Pollocks. And he recently bought a piece of the New York Mets. But the good fortune of one of country's wealthiest men has come at a price: an epic legal battle with his ex-wife that offered an unwelcome look behind the scenes of his lavish lifestyle and, most recently, a brewing insider trading scandal capable of toppling his empire.
Last week, federal authorities arrested Mathew Martoma, a former portfolio manager at an affiliate of the Stamford, Conn.-based firm owned by Cohen, on charges he used illegal tips about an experimental Alzheimer's drug to net more than $276 million for his fund and others.
Court papers don't name Cohen, and federal authorities won't discuss their investigation of him. But they also haven't disputed reports that Cohen is the "Hedge Fund Owner" repeatedly referenced in a criminal complaint against Martoma, marking the first time they have directly linked Cohen to a long-running probe of his firm, SAC Capital Advisors.
The papers describe how Cohen rejected the advice of his own analysts and instead bet heavily on Martoma's tips about secret data from a study of the experimental drug. After learning through Martoma in 2008 that experiments weren't going well, Cohen instructed his top trader to begin dumping stock, "and to do so in a way to not alert anyone else," the papers say.
Martoma, who denies the charges, became the fourth person associated with SAC Capital to be arrested on insider trading charges in the past four years. An SAC spokesman has said the company and Cohen are cooperating with the inquiry and "are confident that they have acted appropriately." But in a conference call with investors Wednesday, Cohen revealed that the Securities and Exchange Commission had notified the firm that it was considering enforcement action. Cohen assured callers that the firm played by the rules.
The anxiety at SAC Capital stands in stark contrast to the more charmed aspects of Cohen's meteoric rise to the hedge fund stratosphere, putting him No. 40 on the list of richest Americans.
The 56-year-old Cohen, who grew up in Great Neck, graduated with a business degree from the prestigious Wharton School at the University of Pennsylvania in 1978. He married his first wife, Patricia, a year later.
They divorced in 1990, and she sued him in 2009, claiming he hid assets to avoid paying a larger divorce settlement.