The six degrees of Steve Cohen

December 3, 2010, 8:44 PM UTC

He’s the man with the bulls-eye on his head, yet the Feds can’t quite seem to hit it. It’s beginning to look like it’s riskier to be associated with the hedge fund giant than it is to be Steve Cohen himself.

Last week’s flurry of news about a massive investigation into insider trading by hedge funds had Wall Street asking its favorite recurring question: Are they finally going to get Steve Cohen this time? Often suspected but never charged with a crime, the legendary hedge fund manager told clients last Tuesday that his firm, SAC Capital Advisors, had received its own subpoena from investigators. But this week, according to the Wall Street Journal, Cohen was unfazed by the circling Feds. He was “in jovial spirits and eager to chat about his fresh art acquisitions” at the Art Basel festival in Miami.

Some of his former co-workers might not be feeling so jovial. The Race for Cohen is a screenplay unfolding like a box office thriller, and here are the main characters:

The Man in the Middle

Steve Cohen, SAC Capital Advisors

Cohen founded SAC Capital in 1992 and has delivered an almost-unbelievable 30% annualized return to investors since. Cohen oversees 300 managers, traders, and analysts, and $12 billion in assets under management—about half of which is his own. Factoid: likes to trade big in shares of Apple (AAPL), a predilection shared by many of his disciples.


Preet Bharara, US Attorney, Southern District of NY

Called the “new Sheriff of Wall Street” by the Wall Street Journal, Bharara may not chase the limelight as much as predecessors Rudy Giuliani and Mary Jo White, but he’s equally if not more determined to bring Wall Street cheaters to heel: witness the ongoing Galleon investigation, arrests, and guilty pleas. Last week, he called inside information a “performance enhancing drug” that allows traders to beat the competition.

BJ Kang, Special Agent, FBI

Reuters called Special Agent Kang, a member of the securities fraud task force, the most feared man on Wall Street. A key player in the arrests of both Bernie Madoff and Raj Rajaratnam, he has reportedly been poking around SAC trading for years. Goes by “B.J.” because his full Korean name is too hard for most people to pronounce.

David Makol, Special Agent, FBI

A member of the Kew Gardens, Queens-based major securities fraud task force of the FBI, Makol is undoubtedly in the hunt for information on SAC trading techniques as well.

Patricia Cohen, Ex-wife of Steve Cohen

Divorced from Steve 20 years ago, Patricia Cohen filed suit only last December to recover what she says is her rightful $300 million share of his fortune. (She received just $1 million and a $3.8 million apartment in 1990, and says he hid assets from her and the court in order to minimize the settlement.)

Ancillary Targets

David Ganek, Level Global Advisors

Man-about-town and owner of works of art by the likes of Richard Prince and Jeff Koons, Ganek worked at SAC for ten years before founding Level Global—which was raided by the FBI last Monday—in 2003. It currently has $4 billion under management, and also has held big positions in Apple.

Related: Danielle Ganek, Wife of David Ganek

Former magazine editor turned novelist-to-the-socialite-crowd. Her novel The Summer We Read Gatsby is set in a “ramshackle Southampton cottage.” As if such a thing existed!

Ian Goodman, Richard Grodin, Stratix Asset Management (defunct)

Goodman and Grodin, SAC alums who founded tech-focused hedge fund Stratix in 2004, have reportedly received a subpoena from the Feds as well. Surprise! Stratix held big positions in Apple.

Richard Choo-Beng Lee, Spherix Capital (defunct)

Lee, who founded Spherix in 2008, worked with accused insider trader Raj Rajaratnam and then subsequently at SAC. He has pled guilty and is cooperating with prosecutors in the Galleon Group investigation. The FBI hopes he will also spill about any illegalities during his five-year gig at SAC from 1999 to 2004.

Don Ching Trang Chu, Primary Global Research

Chu was the first arrest in the latest wide-ranging investigation, based on testimony provided by Richard Choo-Beng Lee, above. Chu is accused of passing inside information about technology companies Atheros Communications (ATHR), Broadcom (BRCM), and Sierra Wireless (SWIR) to Lee.

Lawrence Sapanski, Rich Schimel, Chad Loweth, Co-Founders, Diamondback Capital Management

Another hedge fund raided by the FBI last Monday, Diamondback—with $5.3 billion under management—was founded by these three former SAC traders in 2005. The partners are telling investors they are victims of a “witch hunt.”

Related: Wendy Schimel, Rich’s wife, Steve Cohen’s sister

Caught in the crossfire? If she’s thinking of going on the run, she better start training: Mrs. Schimel ran a 13:11 mile in a 2009 race. (Admittedly, she was held back for good reason. She came in one second behind her five-year-old son.)

Chip Skowron, FrontPoint Partners

The Feds have charged French doctor Yves Benhamou with passing information about trials for hepatitis C drug Albuferon to Skowron, a former SAC analyst. Skowron has been placed on leave and FrontPoint is closing its health-care funds.

Bonus Characters

Milton Balkany, Rabbi

Balkany tried to extort $4 million from SAC by telling them he could prevent a federal inmate from telling investigators about insider trading at SAC. The hedge fund alerted authorities to the attempt, and Balkany was convicted of extortion.

John Kinnucan, Broadband Research

Kinnucan’s subscription service provides intelligence on the technology industry to a customer list that includes SAC. On October 25, he was approached by the Feds and asked to tape record calls with clients. He refused, and is the toast of Wall Street for his loyalty, complete with the celebratory interview on CNBC.

Nicos Stephanou, Former UBS investment banker

In a criminal trial in September, Stephanou testified that he leaked stock tips to SAC trader Jonathan Hollander.

Andrew Tong, Former SAC analyst

In a lawsuit, Tong accused his former supervisor at SAC of forcing him to perform oral sex on him, in addition to demanding that Tong take female hormones in order to turn him into the “ideal” analyst, one with both male and female characteristics.

Also on

Why the Feds want Steve Cohen

Insider trading by hedge funds? I’m shocked! Shocked!

How expert networks came to dominate Wall Street