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 not individuals, stand accused of insider trading.”
But Bharara’s statement also shows that the government can’t find enough information to indict the firm’s founder Steve Cohen, despite a six-year probe of the hedge fund manager that necessitated huge amounts of time, money and resources.
“Clearly they failed to make a case against Cohen beyond a reasonable doubt, even after scouring tens of thousands of emails and squeezing former employees as hard as they could,” says Glen Donath, a former senior assistant U.S. Attorney who specialized in fraud. A source close to the Southern District says that in the past six months, the case has absorbed the office, pulling in additional staff to focus on SAC-related work.
MORE: 5 signs Steven Cohen was trading on insider information
Donath, who is now a partner at Katten Muchin Rosenman, adds that whether or not Cohen ever engaged in insider trading, “the U.S. Attorney’s indictment against SAC is one that stems, in part, from bitterness and vindictiveness” that they were not able to indict the hedge fund manager.
The government has not in recent history used collateral actions to drive an individual out of business who has not been accused of a criminal act, says Stan Twardy, a managing partner at Day Pitney who was the U.S. Attorney of Connecticut from 1985 through 1991. This makes the U.S. Attorney’s case against SAC highly unusual.
To be sure, government investigations have crippled funds in the past. Raj Rajaratnam, a hedge fund manager convicted of insider trading in 2011, shut down his firm soon after he was indicted for insider trading. And Pequot Capital closed in 2009 due to the strain of a years-long insider trading probe by the SEC. A year after the firm closed, it disgorged $28 million to settle charges, and its founder Arthur Samberg was barred from the investment advisory business.
But in the cases of Rajaratnam and Samberg, the men were driven out of business after being charged with insider trading. Cohen has not been charged with committing such an offense, and it seems that he has carefully set up a structure that distances him just enough from his traders to create plausible deniability, Donath says.
MORE: Yep, SAC’s Steve Cohen probably didn’t read his email
For those who believe that Cohen engaged in insider trading for years — the criminal complaint alleges insider trading has been encouraged at SAC since 1999 — his distance from an actual crime is frustrating.
But is it acceptable for the U.S. government to use the legal system to mete out a punishment fit for an inside trader against a man, Cohen, whom they can’t prove has traded on non-public information?
The answer to that question may depend on how one perceives the role of managers and regulators.
“There’s something inherently unattractive about Cohen hiding behind a structure that gives him plausible deniability, but no one forced his employees to work at SAC or to take multi-million dollar paydays for allegedly seeking inside information,” says Donath.
But Tamar Frankel, a law professor at Boston University, sympathizes with Bharara’s office. Frankel says that the government is working within a different sort of ethical framework because it is trying to keep investors and savers from “being fleeced.”
While Cohen may or may not be liable for insider trading under the strict wording of the law, Professor Frankel says that it’s ethical and right for the government to use all tools necessary to punish those who use and encourage the use of insider information.
Unusual Measures
In the government’s 41-page indictment, SAC is held criminally responsible for instances when, the prosecution alleges, employees engaged in insider trading.
Misconduct among employees allegedly was “made possible by institutional practices that encouraged the widespread solicitation and use of illegal inside information,” the complaint says. Insider trading at SAC was allegedly “substantial, pervasive and on a scale without known precedent in the hedge fund industry.”
To understand the gravity of suing a business, consider this: The last time the government brought a criminal case against a company, that company — the accounting firm Arthur Anderson — collapsed. While Anderson was initially found guilty, the verdict was unanimously overturned by the Supreme Court in 2005.
“The handful of men who admit they broke the law does not reflect the honesty, integrity and character of the thousands of men and women who have worked at SAC over the past 21 years,” SAC said in a statement.
The criminal complaint follows a civil suit filed against Cohen last week by the SEC, which claims that Cohen failed to properly supervise two traders who engaged in insider trading, an accusation that could bar Cohen from being a professional money manager.
MORE: SAC holdings soar ahead of possible shutdown
Although six ex-SAC employees have been convicted of, or pled guilty to, insider trading, the SEC’s failure to supervise case includes only two employees out of a firm that reportedly employs about 800 people, 200 of which are portfolio managers and traders. In that light, “barring Cohen from managing outside money seems like a very drastic action,” says Donath.
“Even if [the U.S. Attorney and the SEC] can’t prove Cohen traded on inside information, between the civil case and the criminal complaint it’s clear that the government is anxious to get Cohen out of the industry,” Twardy says.
The government cases could also make a serious dent in Cohen’s personal wealth. His own fortune reportedly accounts for about 60% of SAC’s assets under management and Cohen’s net worth is estimated to be around $9 billion. The Wall Street Journal reports that the government is seeking up to $10 billion in damages.
As the government seeks to put Cohen out of business, it faces a tenacious adversary. Cohen has been denying allegations of insider trading for years, and Twardy points out that he is one of the few individuals who might have resources to rival those of the U.S. government.
We’re watching two giants fight one another, says Twardy. The government wants to declare victory against Cohen matter what it takes to get there. And Cohen is determined so survive. No matter who it turns out, this one might be a fight to the finish.
