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The Taming of the Trading Monster


Whatever humiliation Cohen suffered, the truth was that he’d escaped the worst of it. Martoma, the one person who it appeared could have testified about the source of Cohen’s information, had every motivation to cooperate with the government. He was fired by Cohen in 2010 for not making money; he had three young children and faced a long prison term. Cooperating was his only shot at leniency. But he went to trial and was convicted on February 6—Cohen did him the favor of paying his legal bills. (He didn’t turn on his boss, Cohen’s lawyers contended, because Cohen had done nothing wrong.) Without Martoma, the government could not prove that Cohen knew he was trading on nonpublic information. And with that, the criminal case against Cohen seemed to wind down. He agreed to pay $1.2 billion in fines and seizures, a record sum that would in essence come out of his pocket. And, for the first time, he agreed that SAC would admit guilt. SAC was “deeply remorseful,” said one statement.

Cohen was aware that he’d had a near-death experience.

One day, an admirer approached him on the street. “You’re a legend,” the man said. “Legends are usually dead,” Cohen answered.

The indictment foreclosed on many of his ambitions. The London office, which had 50 employees, closed, as did a smaller office in Chicago. He closed several internal units, too. Some 150 people out of a thousand were fired, or left and weren’t replaced. Four years earlier, he’d lured back a couple of SAC alums, Anil Stevens and Glenn Shapiro, with considerable fanfare—at the time, they were working at Balyasny Asset Management, a $3.3 billion hedge fund in Chicago that Cohen treated as a kind of farm team. In August, Stevens and Shapiro and eight of their traders decamped, with Stevens rumored to be starting his own fund.

“It’s no longer a growth company,” said Selby. “The best talent wants to see upward opportunity,” which comes from investors giving you their money. “That opportunity doesn’t exist in a family office.” For the most ambitious tier of traders, the ones for whom Cohen was a role model, merely holding your own was not so different from losing.

Once, having SAC on your résumé was like graduating from an Ivy League school. Now a connection to Cohen was a stigma. CFOs who formerly jumped on the phone with an SAC analyst now steered clear, concerned that just talking to someone associated with an indicted company was risky. For outsiders, SAC and his family office, which he named Point72, were one and the same. “People at Steve’s firm complain that they don’t get as much corporate access,” said one colleague. “That’s a challenge.”

Employees who remained felt harassed at times. There was an endless flurry of pointed questions from neighbors and friends wanting to know the “real story.” The casual concern, as well as the government’s ongoing attentions, were said to be a motivation for the impending departure of Gabriel Plotkin, one of SAC’s top performers. Plotkin hadn’t been charged with a crime, but one indicted former employee gave him insider information. Plotkin plans to leave SAC to start his own firm—Cohen reportedly agreed to provide seed money.

Cohen found himself in one more unfamiliar position: He was vulnerable. He tried desperately to stem defections, wielding a stick by pressuring managers to sign two-year commitments and threatening to sue those who left before their contracts expired. He also issued several rounds of bonus increases. Some portfolio managers, deploying the skills they’d learned at his side, used their newfound leverage against him, negotiating quicker payouts of deferred benefits.

In trying to manage his anxious office, Cohen set in motion another strategy. It sometimes seemed that Cohen had had a personality transplant; he talked as if he’d been through est training. “I appreciate your commitment, not just to me and this business, but to each other,” he wrote to the staff. SAC had been brutally competitive. Now he celebrated “mutual commitment” and “creating a community.”

On the Street, his competitors took Cohen’s new approach as a sign of weakness. As one recruiter explained, “Other hedge funds smelled blood in the water.” In one three-month period, a dozen managers left, many for competitors like Moore ­Capital and Millennium and BlueCrest. In a reversal of fortunes, Balyasny, the modest midwestern fund that once fed talent to Cohen, now scooped up SAC traders.

“The number of departures was about the same as in previous years,” said an analyst who followed the company. “The problem that you have is that the quality of the departures is much higher.” Of all SAC’s portfolio managers—and there were over 100 at times—only ten or 15 were “the real moneymakers.”


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