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Black Edge: Inside Information, Dirty Money, and the Quest to Bring Down the Most Wanted Man on Wall Street
The story of billionaire trader Steven Cohen, the rise and fall of his hedge fund SAC Capital, and the largest insider trading investigation in history for readers of The Big Short, Den of Thieves, and Dark Money
Steven A. Cohen changed Wall Street. He and his fellow pioneers of the hedge fund industry didn't lay railroads, build factories, or invent new technologies. Rather, they made their billions through speculation, by placing bets in the market that turned out to be right more often than wrong and for this, they gained not only extreme personal wealth but formidable influence throughout society. Hedge funds now oversee more than $3 trillion in assets, and the competition between them is so fierce that traders will do whatever they can to get an edge.
Cohen was one of the industry's biggest success stories, the person everyone else in the business wanted to be. Born into a middle-class family on Long Island, he longed from an early age to be a star on Wall Street. He mastered poker in high school, went off to Wharton, and in 1992 launched the hedge fund SAC Capital, which he built into a $15 billion empire, almost entirely on the basis of his wizard like stock trading. He cultivated an air of mystery, reclusiveness, and excess, building a 35,000-square-foot mansion in Greenwich, Connecticut, flying to work by helicopter, and amassing one of the largest private art collections in the world. On Wall Street, Cohen was revered as a genius: one of the greatest traders who ever lived.
That image was shattered when SAC Capital became the target of a sprawling, seven-year investigation, led by a determined group of FBI agents, prosecutors, and SEC enforcement attorneys. Labeled by prosecutors as a magnet for market cheaters whose culture encouraged the relentless pursuit of edge and even black edge, which is inside information SAC Capital was ultimately indicted and pleaded guilty to charges of securities and wire fraud in connection with a vast insider trading scheme, even as Cohen himself was never charged.
Black Edge offers a revelatory look at the gray zone in which so much of Wall Street functions. It's a riveting, true-life legal thriller that takes readers inside the government's pursuit of Cohen and his employees, and raises urgent and troubling questions about the power and wealth of those who sit at the pinnacle of modern Wall Street.
Steven A. Cohen changed Wall Street. He and his fellow pioneers of the hedge fund industry didn't lay railroads, build factories, or invent new technologies. Rather, they made their billions through speculation, by placing bets in the market that turned out to be right more often than wrong and for this, they gained not only extreme personal wealth but formidable influence throughout society. Hedge funds now oversee more than $3 trillion in assets, and the competition between them is so fierce that traders will do whatever they can to get an edge.
Cohen was one of the industry's biggest success stories, the person everyone else in the business wanted to be. Born into a middle-class family on Long Island, he longed from an early age to be a star on Wall Street. He mastered poker in high school, went off to Wharton, and in 1992 launched the hedge fund SAC Capital, which he built into a $15 billion empire, almost entirely on the basis of his wizard like stock trading. He cultivated an air of mystery, reclusiveness, and excess, building a 35,000-square-foot mansion in Greenwich, Connecticut, flying to work by helicopter, and amassing one of the largest private art collections in the world. On Wall Street, Cohen was revered as a genius: one of the greatest traders who ever lived.
That image was shattered when SAC Capital became the target of a sprawling, seven-year investigation, led by a determined group of FBI agents, prosecutors, and SEC enforcement attorneys. Labeled by prosecutors as a magnet for market cheaters whose culture encouraged the relentless pursuit of edge and even black edge, which is inside information SAC Capital was ultimately indicted and pleaded guilty to charges of securities and wire fraud in connection with a vast insider trading scheme, even as Cohen himself was never charged.
Black Edge offers a revelatory look at the gray zone in which so much of Wall Street functions. It's a riveting, true-life legal thriller that takes readers inside the government's pursuit of Cohen and his employees, and raises urgent and troubling questions about the power and wealth of those who sit at the pinnacle of modern Wall Street.
295 pages, Hardcover
First published February 7, 2017
About the author
Sheelah Kolhatkar
3 books237 followersSheelah Kolhatkar, a former hedge fund analyst, is a staff writer at The New Yorker, where she writes about Wall Street, Silicon Valley and politics among other things. She has appeared as a speaker and commentator on business and economics issues at conferences and on broadcast outlets including CNBC, Bloomberg Television, Charlie Rose, PBS NewsHour, WNYC and NPR. Her writing has also appeared in Bloomberg Businessweek, New York Magazine, The Atlantic, The New York Times and other publications. She lives in New York City.
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Displaying 1 - 30 of 849 reviews
February 27, 2018
A nonfiction book describing in detail Steve Cohen's rise as the most prolific trader on Wall Street and the eventual FBI and SEC investigation into his hedge fund. I'm not really sure what else I can say except like wow maybe I should switch career paths now and just become a financial analyst. Especially the ending of the book where they talk about the deregulation and acquittal of so many of the people convicted of insider trading. I just can not believe they're going to let insider trading become so narrow in scope and I can not believe Cohen got to keep billions of dollars and that he'll be able to start opening up his hedge fund to outside investment again this year after everything. I also cannot believe how much people pay for art. I know art is important but it just feels so god damn gratuitous to pay $140+ million for a painting when he bought his house for like $14 million. Also it's just incomprehensible why anyone would need to have that kind of wealth when we literally let people in this country live with food insecurity. I know that Cohen 'worked' for his money but his work just involved bullying subordinates into getting information he shouldnt have access to anyway and shorting stocks, so basically waiting for companies stock prices to tank. And even worse didn't Preet Bharara get fired or resign after Trump came into office. Are we really going to punish people who try to hold any of those white collar criminals responsible. It all just leaves a bad taste in my mouth. I'm going to go look at masters degrees in financial analysis.
March 4, 2023
If you are in the world of finance, you know who Steven Cohen is. If you are not in finance, you probably don't know who Steven Cohen is, because, escaping prosecution, his name did not become a household name.
This book details how you can be a cut-throat high stakes player on Wall Street, engage in insider trading and get away with it, despite a concerted effort among law enforcement. Cohen, and others, were able to engage in insider trading, amassing fortunes along the way, but had their underlings/scapegoats pay the price when caught.
I have nothing against wealth, when made in legitimate ways through hard work, perseverance, and sacrifice. But this kind of wealth made by cheating and lying is unjustifiable.
This is fascinating non-fiction that reads like fiction, except the bad guys are never made to pay for their crimes. The lingo made my eyes glaze over a few times, but it’s an eye-opening expose of the corruption on Wall Street among the elite few, and details how difficult it is to gather enough evidence to prosecute. Meanwhile those at the top continue operating as always, and living a life of luxury.
This book details how you can be a cut-throat high stakes player on Wall Street, engage in insider trading and get away with it, despite a concerted effort among law enforcement. Cohen, and others, were able to engage in insider trading, amassing fortunes along the way, but had their underlings/scapegoats pay the price when caught.
I have nothing against wealth, when made in legitimate ways through hard work, perseverance, and sacrifice. But this kind of wealth made by cheating and lying is unjustifiable.
This is fascinating non-fiction that reads like fiction, except the bad guys are never made to pay for their crimes. The lingo made my eyes glaze over a few times, but it’s an eye-opening expose of the corruption on Wall Street among the elite few, and details how difficult it is to gather enough evidence to prosecute. Meanwhile those at the top continue operating as always, and living a life of luxury.
December 17, 2017
Ever since the financial crash of 2008, I have felt that Wall Street is no longer part of financial institution of the United States. It's like Wall Street went rouge and serves only a few who consider themselves Masters of The Universe (Bondfire of the Vanities). Stephen Cohen, the star of this book, is one of those Masters of the universe having built a multi-billion dollar hedge fund using insider trading. I always tell my husband, if he or I committed any of the acts the Cohen and his cohorts did we would be locked up for life, the rich are different.
Sheelah Kolhatkar details how Cohen and other traders used inside trading to amass vast fortunes, how the government is all but helpless to stop it and how it probably still continues today. I was totally disgusted when I finished reading the book. I kept wondering how can people be this greedy, what drives them to act in this fashion.
Today when I hear that the stock market has reached record highs, it doesn't increase my feeling of security about our economic future, it actually worries me. When Trump says he is going to roll back regulations, I worry more about this countries financial security. This book reads like a financial thriller the only different being if it were fictional the bad guys would not have won. This review was originally posted on The Pfaeffle Journal
Sheelah Kolhatkar details how Cohen and other traders used inside trading to amass vast fortunes, how the government is all but helpless to stop it and how it probably still continues today. I was totally disgusted when I finished reading the book. I kept wondering how can people be this greedy, what drives them to act in this fashion.
Today when I hear that the stock market has reached record highs, it doesn't increase my feeling of security about our economic future, it actually worries me. When Trump says he is going to roll back regulations, I worry more about this countries financial security. This book reads like a financial thriller the only different being if it were fictional the bad guys would not have won. This review was originally posted on The Pfaeffle Journal
September 8, 2019
Black Edge can be read as a true crime suspense book or as a journalistic revelation of how greed and corruption works in the hedge fund business. I found it worthwhile on both levels not knowing how things would turn out. It’s not a whodunit, but rather a question of whether the perpetrators will be brought to justice. We learn a lot about law enforcement and financial regulation and their limits with respect to insider trading. The story revolves around SAC Capital Advisors and its founder Steven A. Cohen, who used his hedge fund to become one of the richest people in the United States. Kolhatkar gives us a very human presentation and one doesn’t need much financial expertise to understand it. She did a great deal of research and crafts a compelling read that can be appreciated by both investors and the politically minded concerned about Wall Street. I am leaving this review brief to not spoil it for those unfamiliar with the story.
April 6, 2017
If you want to understand the depth of corruption that prevails on Wall Street, a good place to start is New Yorker staff writer Sheelah Kolhatkar‘s admirable new book, Black Edge: Inside Information, Dirty Money, and the Quest to Bring Down the Most Wanted Man on Wall Street.
A loathsome human being
The central character is this superb piece of investigative journalism is Steven A. Cohen, the founder of a hedge fund named SAC Capital Advisors. Cohen is clearly a loathsome human being—obsessed with greed, contemptuous of the law, and ruthless beyond compare. For example, here is an eyewitness account of a statement he made to the traders at his fund while in the midst of ugly divorce proceedings with his first wife. “‘I just got ripped off by my wife,’ he said . . . ‘I’m going to make it all back by cutting your payouts.'” This was not bluster: he actually did it, reducing their compensation from 30% of profits to 25% and increasing his own correspondingly. The author also notes that “he went out of his way to abuse people and belittle them.”
However, Cohen is also undeniably brilliant. Occasionally he’s referred to as the greatest stock trader in Wall Street history. Cohen’s instinct is apparently matchless. Obviously, too, he was diabolically clever in shielding himself from responsibility for the illegal actions he forced his employees to take. After decade-long investigations by the FBI and the SEC, Cohen was forced to close down his hedge fund, but he escaped from prosecution, paying only a fine that was modest on the scale of his wealth. (Cohen is now estimated to have a net worth of $13 billion. That’s billion with a B.) Kolhatkar makes clear that despite his undisputed brilliance as a trader, he broke insider trading laws and regulations to gain most of his fortune.
How hedge funds operate
It helps to understand what hedge funds really are and what they do. Originally, hedge funds were designed to “hedge” or protect the assets of extremely wealthy individuals, pension funds, and other high-net-worth institutions. You can find an explanation of classic hedging strategies in plain English here. Over time, however, as the industry became more competitive, hedge fund managers increasingly gravitated away from investing and took up trading, eventually even trading in and out of stocks over fractions of a second. Kolharkar explains that “the name hedge fund lost any connection to the careful strategy that had given such funds their name and came to stand, instead, for unregulated investment firms that essentially did whatever they wanted.”
The role of hedge funds in the economy
Don’t make the mistake of thinking that hedge funds like Steve Cohen’s invested in the stock market like Main Street’s typical small investor. Kolhatkar quotes an email from one of Cohen’s traders three weeks before earnings of computer manufacturer Dell, Inc. were to be announced: “‘gm looking 17.5% vs. street 18.3%. Doesn’t sound good.'” In translation this jargon would read “Dell’s gross margin is anticipated by insiders to be 17.5% in the most recent quarter as opposed to estimates by Wall Street analysts of 18.3%.” In other words, this trivial difference in earnings for Dell for a three-month period would cause hundreds of millions, perhaps billions of dollars worth of the company’s shares to be sold, thus depressing its stock price. This means, of course, that Dell’s board of directors and top executives would do everything within their power to reverse that decline in the next quarter, regardless of the long-term consequences to the company, its employees, its investor-stockholders, and the economy at large. In this way, Wall Street distorts the American (and ultimately the world) economy. That makes no sense at all except for the gamblers who engage in day-to-day and minute-to-minute stock trading.
Given the complexity of the financial markets, it’s too easy to imagine that hedge funds are just one minor element of the problems they pose for the economy. “By 2015,” Kolhatkar writes, “hedge funds controlled almost $3 trillion in assets around the world and were a driving force behind the extreme wealth disequilibrium of the early twenty-first century.” A couple of numbers convey a sense of the magnitude of the problem caused by hedge funds: as Forbes magazine writes, “In total, the 25 highest-earning hedge fund managers and traders made a combined $12 billion in 2015.” The top earner, James Simons, logged an estimated total of $1.65 billion. In one year! The average top manager of a hedge fund earned nearly half a billion dollars that year.
Should there be an upper limit on compensation?
I recognize that many Americans are convinced there should be no upper limit on income. I disagree because I do not believe that anyone whatsoever could possibly provide enough benefit to society to warrant compensation of half a billion dollars a year—and because I know that such high levels of income are only possible because the U.S. tax laws are rigged to favor the superrich and disadvantage the rest of us. To grasp how much money these numbers represent, consider this: in 2015, the same year cited by Forbes, the single highest-paid corporate executive earned $156 million. Thus, the average top-25 hedge fund CEO received more than three times as much money. And I know no one who would pretend that $156 million represents fair compensation for anyone for a single year’s work.
Seeking a “black edge”
In trading, hedge fund managers routinely came to seek out an information “edge” to reduce or eliminate the risk in their trades. As Kolhatkar explains, a “black edge” is information obtained in obviously illegal ways, such as paying a company insider for advance word of important developments in that company’s fortunes. “Gray edge [is] trickier. Any analyst doing his job well would come across this sort of information all the time. For example, an investor-relations person at a company might say something like ‘Yeah, things are trending a little lower than we thought . . .'” This may or may not constitute insider information. The lawyers decide. “White edge,” of course, is “readily available information that anyone could find in a research report or a public document.” Much, perhaps nearly all, the information on which Steve Cohen based his trades was on the “black edge.”
Hedge funds and the corruption of the American economy
Kolhatkar did not pick Cohen and SAC Capital Advisors arbitrarily. The fund posted average gains of 30 percent per year over 20 years. Anyone who has investment experience knows that it’s virtually impossible to earn such high profits year after year for such a long period entirely by legal means. However, SAC Capital Advisors was in many ways typical of the hedge fund industry. Kolhatkar again: “When one trader was asked if he knew of any that didn’t traffic in inside information, he said: ‘No, they would never survive.'”
The corruption fostered by the hedge fund industry extended far beyond Wall Street. In their scramble for insider information to give themselves a black edge, hedge fund managers bought off doctors throughout the country. “In 2005,” the author notes, “Journal of the American Medical Association published a finding that almost 10 percent of the doctors in the United States had paid ties to Wall Street investors . . . The unofficial number was probably much higher.”
It’s difficult to imagine how any public official acquainted with these facts could seriously contend that Wall Street should be deregulated. Yet the elected leadership of the United States seems hell-bent on doing just that.
About the author
Sheilah Kolhatkar was recently interviewed by the New York Times Book Review. The interviewer notes that she “worked in the late 1990s and early 2000s as an analyst at a couple of small hedge funds. . .” As she told the interviewer on the phone, even then she “heard people talking about the trader Steven A. Cohen and the stellar returns at SAC Capital, which he began in 1992.” Kolhatkar explained why she left the hedge fund industry after the dot-com bust and went into print journalism instead. “I could not handle the stress of making imperfect decisions based on incomplete information with other people’s money . . . I didn’t have the personality for it.” Before signing on with The New Yorker in 2016, Kolhatkar was a features editor and national correspondent at Bloomberg Businessweek.
A loathsome human being
The central character is this superb piece of investigative journalism is Steven A. Cohen, the founder of a hedge fund named SAC Capital Advisors. Cohen is clearly a loathsome human being—obsessed with greed, contemptuous of the law, and ruthless beyond compare. For example, here is an eyewitness account of a statement he made to the traders at his fund while in the midst of ugly divorce proceedings with his first wife. “‘I just got ripped off by my wife,’ he said . . . ‘I’m going to make it all back by cutting your payouts.'” This was not bluster: he actually did it, reducing their compensation from 30% of profits to 25% and increasing his own correspondingly. The author also notes that “he went out of his way to abuse people and belittle them.”
However, Cohen is also undeniably brilliant. Occasionally he’s referred to as the greatest stock trader in Wall Street history. Cohen’s instinct is apparently matchless. Obviously, too, he was diabolically clever in shielding himself from responsibility for the illegal actions he forced his employees to take. After decade-long investigations by the FBI and the SEC, Cohen was forced to close down his hedge fund, but he escaped from prosecution, paying only a fine that was modest on the scale of his wealth. (Cohen is now estimated to have a net worth of $13 billion. That’s billion with a B.) Kolhatkar makes clear that despite his undisputed brilliance as a trader, he broke insider trading laws and regulations to gain most of his fortune.
How hedge funds operate
It helps to understand what hedge funds really are and what they do. Originally, hedge funds were designed to “hedge” or protect the assets of extremely wealthy individuals, pension funds, and other high-net-worth institutions. You can find an explanation of classic hedging strategies in plain English here. Over time, however, as the industry became more competitive, hedge fund managers increasingly gravitated away from investing and took up trading, eventually even trading in and out of stocks over fractions of a second. Kolharkar explains that “the name hedge fund lost any connection to the careful strategy that had given such funds their name and came to stand, instead, for unregulated investment firms that essentially did whatever they wanted.”
The role of hedge funds in the economy
Don’t make the mistake of thinking that hedge funds like Steve Cohen’s invested in the stock market like Main Street’s typical small investor. Kolhatkar quotes an email from one of Cohen’s traders three weeks before earnings of computer manufacturer Dell, Inc. were to be announced: “‘gm looking 17.5% vs. street 18.3%. Doesn’t sound good.'” In translation this jargon would read “Dell’s gross margin is anticipated by insiders to be 17.5% in the most recent quarter as opposed to estimates by Wall Street analysts of 18.3%.” In other words, this trivial difference in earnings for Dell for a three-month period would cause hundreds of millions, perhaps billions of dollars worth of the company’s shares to be sold, thus depressing its stock price. This means, of course, that Dell’s board of directors and top executives would do everything within their power to reverse that decline in the next quarter, regardless of the long-term consequences to the company, its employees, its investor-stockholders, and the economy at large. In this way, Wall Street distorts the American (and ultimately the world) economy. That makes no sense at all except for the gamblers who engage in day-to-day and minute-to-minute stock trading.
Given the complexity of the financial markets, it’s too easy to imagine that hedge funds are just one minor element of the problems they pose for the economy. “By 2015,” Kolhatkar writes, “hedge funds controlled almost $3 trillion in assets around the world and were a driving force behind the extreme wealth disequilibrium of the early twenty-first century.” A couple of numbers convey a sense of the magnitude of the problem caused by hedge funds: as Forbes magazine writes, “In total, the 25 highest-earning hedge fund managers and traders made a combined $12 billion in 2015.” The top earner, James Simons, logged an estimated total of $1.65 billion. In one year! The average top manager of a hedge fund earned nearly half a billion dollars that year.
Should there be an upper limit on compensation?
I recognize that many Americans are convinced there should be no upper limit on income. I disagree because I do not believe that anyone whatsoever could possibly provide enough benefit to society to warrant compensation of half a billion dollars a year—and because I know that such high levels of income are only possible because the U.S. tax laws are rigged to favor the superrich and disadvantage the rest of us. To grasp how much money these numbers represent, consider this: in 2015, the same year cited by Forbes, the single highest-paid corporate executive earned $156 million. Thus, the average top-25 hedge fund CEO received more than three times as much money. And I know no one who would pretend that $156 million represents fair compensation for anyone for a single year’s work.
Seeking a “black edge”
In trading, hedge fund managers routinely came to seek out an information “edge” to reduce or eliminate the risk in their trades. As Kolhatkar explains, a “black edge” is information obtained in obviously illegal ways, such as paying a company insider for advance word of important developments in that company’s fortunes. “Gray edge [is] trickier. Any analyst doing his job well would come across this sort of information all the time. For example, an investor-relations person at a company might say something like ‘Yeah, things are trending a little lower than we thought . . .'” This may or may not constitute insider information. The lawyers decide. “White edge,” of course, is “readily available information that anyone could find in a research report or a public document.” Much, perhaps nearly all, the information on which Steve Cohen based his trades was on the “black edge.”
Hedge funds and the corruption of the American economy
Kolhatkar did not pick Cohen and SAC Capital Advisors arbitrarily. The fund posted average gains of 30 percent per year over 20 years. Anyone who has investment experience knows that it’s virtually impossible to earn such high profits year after year for such a long period entirely by legal means. However, SAC Capital Advisors was in many ways typical of the hedge fund industry. Kolhatkar again: “When one trader was asked if he knew of any that didn’t traffic in inside information, he said: ‘No, they would never survive.'”
The corruption fostered by the hedge fund industry extended far beyond Wall Street. In their scramble for insider information to give themselves a black edge, hedge fund managers bought off doctors throughout the country. “In 2005,” the author notes, “Journal of the American Medical Association published a finding that almost 10 percent of the doctors in the United States had paid ties to Wall Street investors . . . The unofficial number was probably much higher.”
It’s difficult to imagine how any public official acquainted with these facts could seriously contend that Wall Street should be deregulated. Yet the elected leadership of the United States seems hell-bent on doing just that.
About the author
Sheilah Kolhatkar was recently interviewed by the New York Times Book Review. The interviewer notes that she “worked in the late 1990s and early 2000s as an analyst at a couple of small hedge funds. . .” As she told the interviewer on the phone, even then she “heard people talking about the trader Steven A. Cohen and the stellar returns at SAC Capital, which he began in 1992.” Kolhatkar explained why she left the hedge fund industry after the dot-com bust and went into print journalism instead. “I could not handle the stress of making imperfect decisions based on incomplete information with other people’s money . . . I didn’t have the personality for it.” Before signing on with The New Yorker in 2016, Kolhatkar was a features editor and national correspondent at Bloomberg Businessweek.
March 29, 2018
Steven Cohen is back running hedges (or do we call them dodges?) on Wall Street after being banned for two years from investing other people’s money. He is sixty-one years old, and has houses filled with beautiful things. His lifetime focus is trying to edge others in the market using whatever means necessary. He is said to have a reptilian cool when it comes to trading on the margins, making him one of the best traders ever. Cold-blooded is one thing. Cheating with inside information is another.
He can deny it all he wants. Nobody believes him because “everybody does it.” Proprietary, nonpublic information, the ‘black edge’ of the title, “is like doing in elite-level cycling or steroids in professional baseball. Once the top cyclists and home-run hitters started doing it, you either went along with them or you lost.” But it is also that kind of wrong: it corrupts the process so completely that winning no longer means anything.
Kolhatkar wrote for Bloomberg Businessweek for most of the time she spent gathering material for this book, but now she works as a staff writer at The New Yorker. She has the skill to make a boring story about old white men on Wall Street buying stuff interesting. We learn what didn’t work the last time for those who try to ensure the markets are fair. If we are going to stop this kind of self-aggrandizement where it leads to corruption of our most important principles, we need people who are brave enough to take on the cheaters.
That wouldn't be current and former employees of Cohen’s staff who were so internally corrupt already, like lifelong liar and cheat Matt Martoma, serving nine years for his part in the Elan trade that made Cohen dump and short stock he held in a company with a new Alzheimer drug, netting him an estimated $275 million. Martoma had to change his name from Ajai Thomas because he was expelled from Harvard Law School for illegally modifying his transcript to get a clerkship.
Kolhatkar gives Martoma the slightest bit of cover by suggesting Martoma was traumatized in his childhood by a demanding father, but I’m afraid what we see is a character weakness so severe that Martoma felt entitled to criminal behaviors despite being a young, handsome, privileged man. His father says at his trial that he "maxed out" his gifts. Steve Cohen is the same kind of man. He has one gift that we can see. He is also more willing to be criminal than we are, perhaps as compensation for a kind of social and spiritual impoverishment. He will be remembered for…what? For buying things? Illegally. Wow. Big man.
If I understood the investigations into Steve Cohen, it was conducted separately by three different branches of government: the FBI, the U.S. Attorney’s office, and the Securities & Exchange Commission. These players got together occasionally to share information, but were all the time afraid they could not make a case with the information they had gleaned unless someone in the Cohen organization flipped. Kolhatkar has an especially interesting discussion on why the ethically-challenged Martoma did not flip. To date we do not know why.
Several cases were being investigated and litigated by this same group at the same time, i.e., cases for other insider trading by the same miscreants, individual cases against Cohen’s current and former employees, cases against Cohen’s company, etc. Cohen did end up paying more than a billion dollars in fines, but he was never jailed. He was just prevented from playing with other people’s money for two years. One of Cohen’s former traders, David Ganek, actually countersued government entities, the FBI and Preet Bharara’s office of the U.S. Attorney for the Southern District, for abridgment of his constitutional rights during that investigation. Ganek lost that challenge in October 2017.
Shortly after the decisions on Cohen's company SAC and Mathew Martoma, two cases decided earlier setting precedent on insider trading (Todd Newman and Anthony Chiasson from Diamondback and Level Global, two firms with ties to SAC) were reversed, in effect reprimanding Bharara's office of zealotry. A year later, the Supreme Court ruled unanimously that the Newman overturn was too lenient. The fight for right is ongoing.
Kolhatkar draws the contrast between those working for the government with fewer resources and those sleek white men working for Cohen. In the years after the investigation, some attorneys moved from one side to the other: the New York Times reports
He can deny it all he wants. Nobody believes him because “everybody does it.” Proprietary, nonpublic information, the ‘black edge’ of the title, “is like doing in elite-level cycling or steroids in professional baseball. Once the top cyclists and home-run hitters started doing it, you either went along with them or you lost.” But it is also that kind of wrong: it corrupts the process so completely that winning no longer means anything.
Kolhatkar wrote for Bloomberg Businessweek for most of the time she spent gathering material for this book, but now she works as a staff writer at The New Yorker. She has the skill to make a boring story about old white men on Wall Street buying stuff interesting. We learn what didn’t work the last time for those who try to ensure the markets are fair. If we are going to stop this kind of self-aggrandizement where it leads to corruption of our most important principles, we need people who are brave enough to take on the cheaters.
That wouldn't be current and former employees of Cohen’s staff who were so internally corrupt already, like lifelong liar and cheat Matt Martoma, serving nine years for his part in the Elan trade that made Cohen dump and short stock he held in a company with a new Alzheimer drug, netting him an estimated $275 million. Martoma had to change his name from Ajai Thomas because he was expelled from Harvard Law School for illegally modifying his transcript to get a clerkship.
Kolhatkar gives Martoma the slightest bit of cover by suggesting Martoma was traumatized in his childhood by a demanding father, but I’m afraid what we see is a character weakness so severe that Martoma felt entitled to criminal behaviors despite being a young, handsome, privileged man. His father says at his trial that he "maxed out" his gifts. Steve Cohen is the same kind of man. He has one gift that we can see. He is also more willing to be criminal than we are, perhaps as compensation for a kind of social and spiritual impoverishment. He will be remembered for…what? For buying things? Illegally. Wow. Big man.
If I understood the investigations into Steve Cohen, it was conducted separately by three different branches of government: the FBI, the U.S. Attorney’s office, and the Securities & Exchange Commission. These players got together occasionally to share information, but were all the time afraid they could not make a case with the information they had gleaned unless someone in the Cohen organization flipped. Kolhatkar has an especially interesting discussion on why the ethically-challenged Martoma did not flip. To date we do not know why.
Several cases were being investigated and litigated by this same group at the same time, i.e., cases for other insider trading by the same miscreants, individual cases against Cohen’s current and former employees, cases against Cohen’s company, etc. Cohen did end up paying more than a billion dollars in fines, but he was never jailed. He was just prevented from playing with other people’s money for two years. One of Cohen’s former traders, David Ganek, actually countersued government entities, the FBI and Preet Bharara’s office of the U.S. Attorney for the Southern District, for abridgment of his constitutional rights during that investigation. Ganek lost that challenge in October 2017.
Shortly after the decisions on Cohen's company SAC and Mathew Martoma, two cases decided earlier setting precedent on insider trading (Todd Newman and Anthony Chiasson from Diamondback and Level Global, two firms with ties to SAC) were reversed, in effect reprimanding Bharara's office of zealotry. A year later, the Supreme Court ruled unanimously that the Newman overturn was too lenient. The fight for right is ongoing.
Kolhatkar draws the contrast between those working for the government with fewer resources and those sleek white men working for Cohen. In the years after the investigation, some attorneys moved from one side to the other: the New York Times reports
“A day after Lorin L. Reisner announced that he was stepping down as head of the criminal division of the United States attorney’s office in Manhattan, the law firm Paul Weiss on Thursday named him as a partner in its litigation department.”Paul Weiss supplied Cohen’s legal team. Antonia Apps, the attorney who tried the Steinberg case, went to Milbank, Tweed, Hadley & McCloy. A high-level FBI investigator, Patrick Carroll, went to Goldman Sachs' compliance department. Amelia Cottrell of the SEC went to the firm where Cohen’s longtime defense counsel, Marty Klotz, worked. Sure, why not? Maybe one day, one of those who know both sides of the street will do the right thing for the right reasons.
November 16, 2019
This is a fabulous account of the rise and fall of SAC Capital, the world's largest hedge fund. It recounts how the fund encouraged and propagated a culture of cheating and deception to generate enormous and humongous profits for themselves and their clients using insider trading tactics. It gives a glimpse into the luxurious life of Steven Cohen, the founder of SAC Capital, who spent millions of dollars collecting art at auctions and living in mansions in the toniest neighbourhood of New York. The saddest thing one comes across is that his employees bear the brunt of SEC investigation and prosecuted and incarcerated for crimes done for the firm's benefit, while he goes away scot-free after paying a small fine and barred for two years from the markets. This seems like a gross injustice but I guess that's how the American justice system works. The SEC and the State Attorney's Office is portrayed as toothless and powerless against the rich and the mighty.
You feel emotionally involved with three main characters. You feel sorry for Mathew Marthoma whose entire life was made up of deceptions on account of his strict upbringing by his father. You feel sorry for Sid Gilman, the ageing researcher and professor who is emotionally exploited by Marthoma for price-sensitive information and hate Steve Cohen for getting away almost scot-free despite being the main conspirator and ultimate beneficiary of these insider trades.
The author has done some brilliant research to put the narrative together and the plot reads like a financial crime thriller. The lack technical or financial jargons makes the read so easy that even a layman can enjoy the book.
You feel emotionally involved with three main characters. You feel sorry for Mathew Marthoma whose entire life was made up of deceptions on account of his strict upbringing by his father. You feel sorry for Sid Gilman, the ageing researcher and professor who is emotionally exploited by Marthoma for price-sensitive information and hate Steve Cohen for getting away almost scot-free despite being the main conspirator and ultimate beneficiary of these insider trades.
The author has done some brilliant research to put the narrative together and the plot reads like a financial crime thriller. The lack technical or financial jargons makes the read so easy that even a layman can enjoy the book.
March 7, 2017
Fresh Air author interview:
http://www.npr.org/2017/02/07/5138963...
This was more of a forensic study than a trading story. The SEC and the NY Attorney General knew for some time that this hedge fund, among many others, were trading on insider information, but did not have to tools to stop it for many years. By the time Steve Cohen made a deal to close it, he had personally amassed 10 billion dollars, making the 1.2 billion penalty minimal.
The real takeaway here, is that these people will always have a new "black edge", and everyone else will be left behind. The big fish swim away and the underlings go to prison. It is a cynical lesson, but greed and pride drive Wall Street. We have to cope with it, and see that the more outrageous violators are stopped, even if they are never really punished.
http://www.npr.org/2017/02/07/5138963...
This was more of a forensic study than a trading story. The SEC and the NY Attorney General knew for some time that this hedge fund, among many others, were trading on insider information, but did not have to tools to stop it for many years. By the time Steve Cohen made a deal to close it, he had personally amassed 10 billion dollars, making the 1.2 billion penalty minimal.
The real takeaway here, is that these people will always have a new "black edge", and everyone else will be left behind. The big fish swim away and the underlings go to prison. It is a cynical lesson, but greed and pride drive Wall Street. We have to cope with it, and see that the more outrageous violators are stopped, even if they are never really punished.
April 17, 2023
4 stars. An extremely detailed and informative book about insider trading over the last few decades, specifically focused around Steven Cohen and his cohorts. Well written and engaging from beginning to end.
That said, like many books about white collar crime, this is an incredibly frustrating read, through no fault of the author. You just know from the beginning that the criminals aren't going to get what they deserve, because they have a boatload of money and expensive lawyers.
The blatant, unfettered corruption in the financial sector is so infuriating. 🤬
That said, like many books about white collar crime, this is an incredibly frustrating read, through no fault of the author. You just know from the beginning that the criminals aren't going to get what they deserve, because they have a boatload of money and expensive lawyers.
The blatant, unfettered corruption in the financial sector is so infuriating. 🤬
July 6, 2020
The say goes "There are three verdicts: guilty, not guilty and rich". This book shows exactly this. It's better to be rich guy and end up with wrist slap (5% of his net worth - right, it's 800M, but still 5% of 16B). And scapegoat who agreed to help justice will go to jail for long time. Disgusting, but again "greed is good!"
July 10, 2020
Finishing this book filled my heart with sadness. We poor fucks are done for. That's what this book proves.
No institution, no law, no amount of Harvard degrees, no talent, no amount of willpower can do anything to a guy who has the money to throw around with half a brain. Nothing. Zilch. Nada.
All that money siphoned off, people coerced and careers destroyed and the guy is still free and legally at that for the price of a fine. Fuck.
Brilliant writing by the author. Five star effort. Bravo to her courage, may she live long and safe. Us schmucks have one thing going for us, courageous journalists who have the balls to take on these rich people and bring their stories of theiving and debauchery to our attention.
Buy it first hand please.
No institution, no law, no amount of Harvard degrees, no talent, no amount of willpower can do anything to a guy who has the money to throw around with half a brain. Nothing. Zilch. Nada.
All that money siphoned off, people coerced and careers destroyed and the guy is still free and legally at that for the price of a fine. Fuck.
Brilliant writing by the author. Five star effort. Bravo to her courage, may she live long and safe. Us schmucks have one thing going for us, courageous journalists who have the balls to take on these rich people and bring their stories of theiving and debauchery to our attention.
Buy it first hand please.
April 27, 2018
Sheelah Kolhatkar does several things very well. She tells a compelling and thoroughly researched story of Wall Street greed, she makes complicated financial jargon accessible to a layman, and she vividly illustrates the corrupt lives of hedge fund moguls and unscrupulous white shoe lawyers.
And yet, I have a few complaints (gripes?) that prevent me from giving Black Edge a full five stars.
First, and while this is an incredibly minor point, humor me...
I hate the way that Kolhatkar (or her editor?) has organized the footnotes. While they add to the text and illustrate her exhaustive reporting, there is no indication to the reader that they exist prior to the Endnotes section. Why hide such valuable literary garnish? I have to imagine that a decision was made (probably by an editor or a publisher) to hide these footnotes so as not to appear “haughtily academic.” Fuck that.
Second—and this is a bit more substantive—Kolhatkar focuses her narrative (almost exclusively) on the perpetrators of these legendary financial crimes and the people who prosecuted them. The victims of these crimes—including the corporate sources of insider information, the largely ignorant families of the defendants, and the investors in these shadowy hedge funds—receive little attention in this slim volume. I found myself wondering, on several occasions, how Steven Cohen’s family reacted to the charges against him.
While much of this complaint obviously rests in the nature and limits of reporting (obviously Kolhatkar can’t compel testimony), it might have added to the impact of the text to include more victim and/or bystander perspectives.
And yet, I have a few complaints (gripes?) that prevent me from giving Black Edge a full five stars.
First, and while this is an incredibly minor point, humor me...
I hate the way that Kolhatkar (or her editor?) has organized the footnotes. While they add to the text and illustrate her exhaustive reporting, there is no indication to the reader that they exist prior to the Endnotes section. Why hide such valuable literary garnish? I have to imagine that a decision was made (probably by an editor or a publisher) to hide these footnotes so as not to appear “haughtily academic.” Fuck that.
Second—and this is a bit more substantive—Kolhatkar focuses her narrative (almost exclusively) on the perpetrators of these legendary financial crimes and the people who prosecuted them. The victims of these crimes—including the corporate sources of insider information, the largely ignorant families of the defendants, and the investors in these shadowy hedge funds—receive little attention in this slim volume. I found myself wondering, on several occasions, how Steven Cohen’s family reacted to the charges against him.
While much of this complaint obviously rests in the nature and limits of reporting (obviously Kolhatkar can’t compel testimony), it might have added to the impact of the text to include more victim and/or bystander perspectives.
April 22, 2017
This is eerily similar to Bobby Axelrod and the Billions plot lines. So good.
November 19, 2018
Black Edge happens when a trader gains inside information to a given company's up/downs and then proceeds to short the shares, earning millions and breaking every ethical/moral/legal law which exists on financial trading.
Sheelah Kolhatkar's book is the rather shameful history of a hedge-fund mogul Steven Cohen, his cronies and associates who went on to earn billions based on black edges they ruthlessly gathered from around the world. False friendships, lies, bribes, enticements, inducements, flattery, % shares and every other trick available in the book of sleaziness. The cut-throat world of hedge funds and Wall-street egomaniacs, make money for money's sake - a self-propagating, a selfish loop which cuts through ethics, law and in some cases even humanity like a hot knife through butter.
This book is also the story of how the laissez-faire attitude has given Wall Street the leeway to usher in the new age phenomena of hedge funds providing fuel to the ever-increasing societal inequality and cultivating a false adage famously said by Gordon Gecko in Wall Street (1987) -
“Greed is right.
Greed works.
Greed clarifies, cuts through, and captures the essence of the evolutionary spirit.
Greed, in all of its forms-greed for life, for money, for love, for knowledge - has marked the upward surge of mankind"
The only answer which this book gives us to the Gordon Gecko's of the modern world is - NO!
My Rating - 5/5
Sheelah Kolhatkar's book is the rather shameful history of a hedge-fund mogul Steven Cohen, his cronies and associates who went on to earn billions based on black edges they ruthlessly gathered from around the world. False friendships, lies, bribes, enticements, inducements, flattery, % shares and every other trick available in the book of sleaziness. The cut-throat world of hedge funds and Wall-street egomaniacs, make money for money's sake - a self-propagating, a selfish loop which cuts through ethics, law and in some cases even humanity like a hot knife through butter.
This book is also the story of how the laissez-faire attitude has given Wall Street the leeway to usher in the new age phenomena of hedge funds providing fuel to the ever-increasing societal inequality and cultivating a false adage famously said by Gordon Gecko in Wall Street (1987) -
“Greed is right.
Greed works.
Greed clarifies, cuts through, and captures the essence of the evolutionary spirit.
Greed, in all of its forms-greed for life, for money, for love, for knowledge - has marked the upward surge of mankind"
The only answer which this book gives us to the Gordon Gecko's of the modern world is - NO!
My Rating - 5/5
April 30, 2021
This is a very good book. I'm just unable to finish it due to personal reasons.
Stopped on page 156 of 295 pages total. Hope to finish this one day.
Five stars.
Stopped on page 156 of 295 pages total. Hope to finish this one day.
Five stars.
June 9, 2022
This book explains the mechanics behind the spectacular and abnormal results produced by a few hedge funds, especially SAC Capital, founded in 94 and led by Steve Cohen until its forced closure. Hedge funds controlled around 3 trillion USD by 2015 and produced enormous profits for its investors and the fund managers working there.
All of this wouldn’t be wrong except for the reasons why most of their risky speculative bets come up on the winning side… the so called black edge. When I picked up this book, I didn’t understand what it’s title meant, now I do. This is the privileged, confidential, yet non-public information these so called investment managers got by paying insiders, industry experts or “friends of a friend” to obtain an advantage over all other investors, e.g., receiving the quarterly results before they were made public. This is not just questionable, this is clearly illegal and it constitutes a very well defined crime in the financial industry. And to think there were serious and well-established companies that made money by facilitating the “professional collaboration” between those “industry experts” and the “financial sector players”!
The learning of the inner details of this process and the explanation of why did these hedge funds got such spectacular results was the good outcome of reading this book. The bad feeling is left when reading about the efforts of both SEC and FBI, along more than five years to prove in court that these people were committing a crime and put them behind bars. And the bad after taste is when you learn that only the small fish, the investment manager that made 9 million was put behind bars for 9 years whereas the big shark, who personally made close to 250 million, escaped with no time in jail or, for that matter, any formal accusation.
Anyways, a very informative, fast-paced, well written, in my view, account of the facts and inner details of this case, surely gets my full recommendation for anyone interested in these matters.
All of this wouldn’t be wrong except for the reasons why most of their risky speculative bets come up on the winning side… the so called black edge. When I picked up this book, I didn’t understand what it’s title meant, now I do. This is the privileged, confidential, yet non-public information these so called investment managers got by paying insiders, industry experts or “friends of a friend” to obtain an advantage over all other investors, e.g., receiving the quarterly results before they were made public. This is not just questionable, this is clearly illegal and it constitutes a very well defined crime in the financial industry. And to think there were serious and well-established companies that made money by facilitating the “professional collaboration” between those “industry experts” and the “financial sector players”!
The learning of the inner details of this process and the explanation of why did these hedge funds got such spectacular results was the good outcome of reading this book. The bad feeling is left when reading about the efforts of both SEC and FBI, along more than five years to prove in court that these people were committing a crime and put them behind bars. And the bad after taste is when you learn that only the small fish, the investment manager that made 9 million was put behind bars for 9 years whereas the big shark, who personally made close to 250 million, escaped with no time in jail or, for that matter, any formal accusation.
Anyways, a very informative, fast-paced, well written, in my view, account of the facts and inner details of this case, surely gets my full recommendation for anyone interested in these matters.
March 8, 2017
Sheelah Kolhatkar’s Black Edge: Inside Information, Dirty Money, and the Quest to Bring Down the Most Wanted Man on Wall Street is the story of what may be the most important insider trading case of all time. The case against Steven Cohen and SAC Capital is complicated and involves a lot of different people. Although prosecutors were able to make a case against some of Cohen’s traders, they were never able to conclusively prove that Cohen himself traded on inside information. If nothing else, this book illustrates the difficulty in prosecuting insider trading and ensuring proper financial regulation in general.
April 22, 2018
For me this book was interesting as a sorts of Steven Cohen's unofficial biography (although author was never permitted an interview with him) - his upbringing, early career, bits and pieces on his modus operandi when it comes to trading. Nothing new, for sure, but neatly put together in one place.
The second part of the book - the SEC/FBI investigation, case-building and ensuing legal maneuvers - is underwhelming, neither revealing nor especially entertaining (better watch "Billions" :] ).
The finishing idea was worth mentioning, though: within modern US legal system it has become _almost impossible_ to charge someone for insider trading as long as that person was operating at high levels and distant enough from the original source of insider information. One more argument for technical analysis of single stocks just before earnings announcement or potential M&A :]
The second part of the book - the SEC/FBI investigation, case-building and ensuing legal maneuvers - is underwhelming, neither revealing nor especially entertaining (better watch "Billions" :] ).
The finishing idea was worth mentioning, though: within modern US legal system it has become _almost impossible_ to charge someone for insider trading as long as that person was operating at high levels and distant enough from the original source of insider information. One more argument for technical analysis of single stocks just before earnings announcement or potential M&A :]
March 5, 2017
One of those books where Ivy-educated lawyers adjust their silk ties as they stride across the worn marble floors of courthouses just a few blocks from the tony addresses where they grew up and attended prestigious private schools that were the training grounds of Manhattan's elite, unlike their clients, who grew up at the bottom rung of Long Island's etc. etc. you've read it before. But for all that perfectly fine.
May 22, 2017
(Reviewer's Note: I just wrote a more in depth review of this book on my weekly book blog. If you like this review and would like to read more, click on the following link: https://tobereadnow.blogspot.com/2017...)
The 2008 financial crisis laid bare how greed and fraud had taken over Wall St. nearly bankrupting the country in the process. Hedge funds in particular were singled out for stock market speculation that served very little purpose, yet commanded huge amounts of capital and salaries for its employees.
One of the criticisms of financial reform in the Obamacare years was that practically. O one went to jail for what they did. This book shows how hedge funds, in spite their exhaustive efforts to bring inside traders to justice, have insulated themselves from federal prosecution and even the captured the regulators who are supposed to be policing the industry.
This book focuses on one man, Steven Cohen, and how he rose to become one of the top hedge fund managers in the country. It also shows how Mr. Cohen created a culture of insider trading while making it difficult for federal prosecutors to get at him without flipping lower level members in his company. If this all sounds like the Sopranos to you, the author makes the analogy to the mob a few times too.
The book also shows how federal prosecutors worked day and night, but, at the end of the day, came up empty handed. Cohen was never prosecuted, several of his low level employees had their charges dismissed, and the money Mr. Cohen had to pay in fines was made back in a few days in spite of its 1.2 billion size. And, to add insult to injury, many of the investigators and lawyers who worked so hard to try to put Cohen behind bars were hired by the very firms they were investigating later. It is a sickening example of regulatory capture.
Having read this book, I am convinced that Wall St. will never clean up its act on its own. Major legislation is needed to reform how the stock market is policed and how SEC and other federal investigators are hired by the financial industry. What's more, Wall St. will never be reformed until even the highest bosses in the financial industry are held accountable for their actions as much as any other criminal on the street is.
A fascinating peek at Wall St. and the process of white collar investigations and prosecutions, I recommend this book to anyone who wants to know more about the corruption at the heart of our country's financial capitol.
The 2008 financial crisis laid bare how greed and fraud had taken over Wall St. nearly bankrupting the country in the process. Hedge funds in particular were singled out for stock market speculation that served very little purpose, yet commanded huge amounts of capital and salaries for its employees.
One of the criticisms of financial reform in the Obamacare years was that practically. O one went to jail for what they did. This book shows how hedge funds, in spite their exhaustive efforts to bring inside traders to justice, have insulated themselves from federal prosecution and even the captured the regulators who are supposed to be policing the industry.
This book focuses on one man, Steven Cohen, and how he rose to become one of the top hedge fund managers in the country. It also shows how Mr. Cohen created a culture of insider trading while making it difficult for federal prosecutors to get at him without flipping lower level members in his company. If this all sounds like the Sopranos to you, the author makes the analogy to the mob a few times too.
The book also shows how federal prosecutors worked day and night, but, at the end of the day, came up empty handed. Cohen was never prosecuted, several of his low level employees had their charges dismissed, and the money Mr. Cohen had to pay in fines was made back in a few days in spite of its 1.2 billion size. And, to add insult to injury, many of the investigators and lawyers who worked so hard to try to put Cohen behind bars were hired by the very firms they were investigating later. It is a sickening example of regulatory capture.
Having read this book, I am convinced that Wall St. will never clean up its act on its own. Major legislation is needed to reform how the stock market is policed and how SEC and other federal investigators are hired by the financial industry. What's more, Wall St. will never be reformed until even the highest bosses in the financial industry are held accountable for their actions as much as any other criminal on the street is.
A fascinating peek at Wall St. and the process of white collar investigations and prosecutions, I recommend this book to anyone who wants to know more about the corruption at the heart of our country's financial capitol.
September 12, 2018
I read Sheelah Kolhatkar's August 27, 2018 article in The New Yorker titled "Paul Singer, Doomsday Investor" and I was hooked by not only the story, but also her story-telling ability. Thus I came across her book 'Black Edge' which is a well-written and well-told story about the shadier side of the hedge fund industry, specifically about an obscure hedge fund company called SAC Capital that in its heyday few people outside powerful circles in Wall Street had heard of. Even more interesting is the story about its founder, Steven A. Cohen, who is just a cunning character to say the least.
The Racketeer Influenced and Corrupt Organization Act (RICO) was originally enacted to target the Mafia 'by holding the leaders of a criminal syndicate responsible for the actions of its lower-level employees'. Yeah, as we see the story evolve, there is the low-level trader, who takes the fall for his company's (SAC) actions (specifically for making a windfall of almost a quarter of a billion dollars in profits by shorting a drug company's stock).
Black edge, Wall Street jargon for material, non-public, inside information, is crucial for traders on Wall Street to survive; it is, as Sheelah puts it "...like doping in elite-level cycling or steroids in professional baseball. Once the top cyclists and home-run hitters started doing it, you either went along with them or you lost."
We are also introduced to the complex and sometimes tense dynamics amongst the three main parties involved in the multi-year investigation of SAC Capital and other related cases: the NY regional office of the SEC, the NY field office of the FBI, and the U.S. Attorney's Office for the Southern District of New York.
What does not happen in the end should give us pause for thought because the big, powerful money in this country is slowly shaping the system to their advantage and the system is turning into one that will only enable the big and powerful money elements in society.
The Racketeer Influenced and Corrupt Organization Act (RICO) was originally enacted to target the Mafia 'by holding the leaders of a criminal syndicate responsible for the actions of its lower-level employees'. Yeah, as we see the story evolve, there is the low-level trader, who takes the fall for his company's (SAC) actions (specifically for making a windfall of almost a quarter of a billion dollars in profits by shorting a drug company's stock).
Black edge, Wall Street jargon for material, non-public, inside information, is crucial for traders on Wall Street to survive; it is, as Sheelah puts it "...like doping in elite-level cycling or steroids in professional baseball. Once the top cyclists and home-run hitters started doing it, you either went along with them or you lost."
We are also introduced to the complex and sometimes tense dynamics amongst the three main parties involved in the multi-year investigation of SAC Capital and other related cases: the NY regional office of the SEC, the NY field office of the FBI, and the U.S. Attorney's Office for the Southern District of New York.
What does not happen in the end should give us pause for thought because the big, powerful money in this country is slowly shaping the system to their advantage and the system is turning into one that will only enable the big and powerful money elements in society.
October 22, 2018
Very engaging, as exciting as any good financial / legal thriller, a real page-turner. It’s about an FBI / SEC investigation aimed at bringing down Steven Cohen, a highly successful hedge fund manager admired as a semi-god on Wall Street, and his sleazy firm, SAC Capital, being notorious for insider trading. Without disputing the evident financial genius of Cohen he seems to have built SAC Capital around gaining and trading on the basis of ‘black edge’ i.e. information not available to the public. Unsurprisingly that’s illegal. Cohen’s lieutenants knew though that either they deliver the expected financial results in return for bonuses of astronomical heights, even by Wall Street standards, or they get the sack. Cohen maintained a sophisticated system to insulate himself as much as possible from insider data. He simply traded based on recommendations from his managers without delving into the questionable source of their info. The author’s description of how more and more Wall Street guys flipped during the evolving FBI investigation to happily give up their ‘best’ buddies in order to save their own skin was both funny and disgusting simultaneously. If you have this kind of ‘friends’, you really do not need enemies. In the end, the best FBI / SEC could achieve against Cohen was a fine for SAC Capital and its forced closure. Cohen, whose net wealth is estimated to be around $14 billion, did not have to go to jail contrary to some lower-level guys. He remained untouchable save a ban from conducting investment activities for two years. That 2-year ban expired this year and his new firm, called Point72, has already raised more than $4 billion outside capital. The moral of the story? As long as you are high enough in the food chain and you astutely organize your insider trading activities the government will have a hell of a hard time to prove that you did anything illegal…
November 24, 2018
Fast-paced, informative and highly readable. The author is clearly familiar with the subject matter and tells the story very well. If you're not so interested in financial markets or if it bothers you to read about unseemly people making obscene fortunes then this may not be the book for you.
Steven A. Cohen, the hedge fund industry, U.S. Attorney's Office for the Southern District, SEC and FBI combine to make a compelling narrative. Kolhatkar's strength is her knowledge of the hedge fund world and her ability to bring the reader in without being too technical or elementary. Her early material about the government investigators, prosecutors and regulators was a little formulaic at first but improved greatly as the book progressed.
Along with the many interesting people we meet (the industry people are far more interesting than the government employees) there are some very good insights about how hedge funds get their information, both legitimately (less interesting) and questionably (the information about expert networks was fascinating and nauseating). Kolhatkar also does well to raise the question of whether it's a good idea for a subject/target to let the bigger target (Steven A. Cohen/SAC Capital) pay their legal fees. Who's the real client?
Anyone thinking of reading this book would do well to know as little as possible going in. My highlights are public and the early ones are safe to read but there are likely spoilers later on.
Steven A. Cohen, the hedge fund industry, U.S. Attorney's Office for the Southern District, SEC and FBI combine to make a compelling narrative. Kolhatkar's strength is her knowledge of the hedge fund world and her ability to bring the reader in without being too technical or elementary. Her early material about the government investigators, prosecutors and regulators was a little formulaic at first but improved greatly as the book progressed.
Along with the many interesting people we meet (the industry people are far more interesting than the government employees) there are some very good insights about how hedge funds get their information, both legitimately (less interesting) and questionably (the information about expert networks was fascinating and nauseating). Kolhatkar also does well to raise the question of whether it's a good idea for a subject/target to let the bigger target (Steven A. Cohen/SAC Capital) pay their legal fees. Who's the real client?
Anyone thinking of reading this book would do well to know as little as possible going in. My highlights are public and the early ones are safe to read but there are likely spoilers later on.
July 25, 2017
If you're of the 1%, read this book and laugh your ass off at how stupid we 99%ers are. If you're of the 99%, read this only if you enjoy flaying yourself with the criminal impunity of the 1%. A quote-"There was no [moral] code at all, nothing beyond a shared lust for making money." And the double whammy- not only is criminality rampant both on Wall Street and within our corporate structure, it is winked at by the feds. The SEC have had their teeth removed, sans dentures, and prosecutors are so afraid to lose or too lazy to try the Big Boys that a fine (operating expense, like paper clips) and a corporate guilty plea (now a badge of honor) are handed out like peppermints. Individuals are not culpable; indeed, per the bailout, they are rewarded. White collar crime is unique. There is crime but no criminals. There is wrongdoing-cheating, bribing, bullying- but no wrongdoers. To these guys, law is just a joke and justice the punchline. And they just laugh and laugh at the rest of us schmucks.
September 12, 2017
I started this on my kindle and ended on audio. This gave me a lot more insight into the financial world and a lot of the layered corruption that goes on there. I'm definitely not going to quit my day job and become a trader after reading this as I'm still pretty confused about how hedge funds work, but I do have a better grasp now. My favorite part of the book was the behind the scenes look at law enforcement going after insider trading. When Martha Stewart's case went down in all seemed so quick and easy (I'm sure it wasn't), this book shows just how hard it is to prove wrong doing, and how it is even more difficult to prosecute.
February 25, 2018
A financial thriller that is (very unfortunately, given the bad-guys-win conclusion) nonfiction. Even the most casual reader of business news will find the overall thrust of this book -- very rich people get what they want -- not so surprising; what DID surprise me, however, was just how incredibly difficult it is for authorities to bring rich baddies to justice, even when proof of their illegal behavior seems virtually incontrovertible. I'm no Wall Street aficionado but Kolhatkar's a terrific writer who makes the murky world of hedge funds come to light and to life. Recommended, especially to those who wonder why all the architects of the 2008 financial crisis aren't in jail.
September 6, 2017
This is the best non-fiction legal thriller I've read since "A Civil Action." Not as well written as that book and not as many twists and turns as in that story, but still a gripping read, even if you are familiar with most of the details from news coverage at the time. I still highly recommend this book.
December 15, 2017
I followed all the pieces of this story when it was in the news but it was nice to have it all in one place. This is a nice intro into hedge funds, insider trading, and financial crimes. It's a fun fast read.
Read
April 23, 2017Well-worth the read if you're interested in securities law, the SEC, finance, insider trading, etc., especially post-2008/2009 reforms to see how things have changed (and more importantly, how they haven't).
May 31, 2017
Well written and well researched and weirdly endlessly entertaining. Think it has general interest even if not connected to finance or law. To extent author has agenda w/r to subject it's not overt at all.
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