FORTUNE -- The conviction of former SAC trader Mathew Martoma on Thursday seemingly puts Steven A. Cohen on the hot seat. But even with a guilty verdict against another one of his underlings -- Martoma makes eight -- Cohen is unlikely to end up behind bars.
Not that Cohen should be celebrating. Preet Bharara, with the Martoma conviction, continues his perfect streak in insider trading cases. Since taking over the U.S. Attorney's Office for the Southern District of New York, Bharara is 79 for 79 on insider trading cases. And only 18 of those were plea deals. The rest were won at trial.
And that all sounds very impressive, until you consider this: Historically, prosecutors have had a near-perfect record getting convictions in insider trading cases. It's hard to think of a case that didn't lead to a conviction. And that's particularly true for the Southern District of New York, where the conviction record for all cases is well over 90%.
If you know anything about insider trading, this seems like a very odd fact. The laws around insider trading are wishy-washy at best. Nearly all legal experts say it is very hard to define what is insider trading and what is not. And traders think so too, but they might not be an especially objective bunch, particularly those who conduct insider trading.
So if the law is unclear, why is it that prosecutors are able to convince juries their interpretation is correct so much of the time? The answer: While there is not a great definition of insider trading, it's pretty clear what type of evidence will put you in jail for insider trading. And prosecutors are very good at knowing when they have that type of evidence and when they do not.
That probably means that Bharara and his pals have done the calculus and have decided that there isn't a winnable criminal case to be made against Cohen, who founded and ran SAC Capital, the multibillion dollar hedge fund that Martoma worked at when he made the trades that got him in trouble. (The Securities and Exchange Commission is still going ahead with a case to bar Cohen from the finance industry. Cohen is already in the process of winding SAC down.) The Martoma conviction is unlikely to change that.
It is possible that Martoma would now agree to testify against Cohen in exchange for a lighter sentence. He faces as much as 45 years behind bars. But that still might not help the case against Cohen. Martoma didn't testify himself, but he and his lawyers did have a lot of experts testify on his behalf to try to prove that what he did was not insider trading. So it will be hard for him to now flip and say, "I was insider trading, I knew it, and I know that Cohen was doing it too." Also, now that Martoma is facing lots of jail time, it will be easy for a defense lawyer to raise doubts about his testimony. He is clearly motivated.
So, either in or out of the finance business, Cohen is likely to remain a free man.
What does all of this mean? One thing for sure: Apparently, our justice system is much better at putting people behind bars for breaking the law trading individual stocks than it is for trading and creating billion-dollar derivative bets that leave millions in foreclosure and our financial system near the brink. Second, even when it comes to individual stock trades, the boss is still safe.
A longstanding anomaly in American law gives federal prosecutors enormous power in deciding whether to punish a large corporation for the actions of even a single employee.
By Roger Parloff, senior editor
FORTUNE -- Hedge fund powerhouse SAC Capital Advisors, indicted Thursday for wire and securities fraud violations after six of its employees pleaded guilty to those charges, appears to have close to no legal defense to the charges it faces.
That's MOREJul 26, 2013 2:08 PM ET
Criminal charges against hedge fund are a backdoor way to end Steve Cohen's career.
FORTUNE -- When criminal charges were filed Thursday against the hedge fund SAC Capital, Preet Bharara, the U.S. Attorney for the Southern District of New York, held a press conference to announce the fruits of a years-long government investigation.
"SAC became, over time, a veritable magnet for market cheaters," Bharara told reporters. "That's why the institution, and MOREKatie Benner - Jul 26, 2013 7:01 AM ET
Traders buy up SAC-owned stocks.
FORTUNE -- Federal prosecutors today filed criminal insider trading charges against hedge fund SAC Capital, one week after filing civil charges against firm founder Steve Cohen. WSJ is reporting that the government is seeking $10 billion from SAC, while Fox Business says that SAC may shut down its fund by as early as later this afternoon.
One thing we know for sure is that SAC Capital's top MOREDan Primack - Jul 25, 2013 1:42 PM ET
SEC files civil case against hedge fund titan.
FORTUNE -- Apparently teflon sometimes can melt in the heat.
The Securities and Exchange Commission today filed civil charges against hedge fund titan Steve Cohen, alleging that he failed to "reasonably supervise" two employees at his SAC Capital. The pair -- Mathew Martoma and Michael Steinberg -- both had been previously charged with insider trading.
"Hedge fund managers are responsible for exercising appropriate supervision over their employees MOREDan Primack - Jul 19, 2013 2:47 PM ET
A new arrest at an SAC fund brings the government closer to Steve Cohen's door. Now might be a good time to become a family office in order to avoid future scrutiny.
FORTUNE -- The past few days haven't been kind to Steve Cohen, founder of the mega-hedge fund SAC Capital.
On Thursday, a judge decided not to approve his firm's settlement of insider trading charges with the Securities and Exchange Commission.
A MOREKatie Benner - Mar 29, 2013 2:05 PM ET
Silicon Valley's hottest non-consumer startup keeps getting richer.
TechCrunch yesterday reported that Palantir Technologies, a Silicon Valley-based provider of analytics platforms for financial and intelligence clients, has raised $70 million in Series F funding. From the post:
"While the company declined to reveal the valuation in the round, we've learned from sources that it is around $2.5 billion. Two unnamed New York-based hedge funds anchored the round, and multiple early investors and university endowments MOREDan Primack - Oct 7, 2011 10:45 AM ET
Senator Charles Grassley gave regulators more time to reveal details into whether they're miserably failing when it comes to investigating SAC Capital, or merely fumbling the ball. And the SEC didn't want to comply with that?
FORTUNE -- The Securities and Exchange Commission let Senator Charles Grassley know that the office will not be giving him any information regarding how regulators have handled referrals related to possibly suspicious trading at SAC MOREKatie Benner - Jun 10, 2011 1:14 PM ET
* What did SAC Capital know, and when did it know it? SEC investigates MedImmune trades from 2007.
* Paul Hyman: Why has H1-B visa demand plummeted?
* Dave Sekera: Is Japan next on the credit downgrade list?
* Morning Call: U.S. futures point lower, London falls early, European shares retreat and the Nikkei climbs.
* Ben Parr: Microsoft's Steve Ballmer conundrum
* Fred Wilson: Enough is enough on software patents
* Survey says: Most Americans still believe the country MOREDan Primack - Jun 1, 2011 7:25 AM ET
How would YOU defend yourself from insider trading charges? You can go the Raj Rajaratnam route or the Steve Cohen one. I'd take the latter.
If a man is known by the company he keeps (or has kept), then these are tough times, reputationally speaking, for hedge fund kingpins Raj Rajaratnam and Steve Cohen. While neither has been convicted of a crime, hardly a day goes by in which we MOREDuff McDonald, Contributing Editor - Feb 2, 2011 11:10 AM ET
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