Steve Cohen doesn’t really do subtle. Two days after the SEC filed a civil suit against him for failing to supervise his fund managers, Cohen’s legal team responded with a defense worthy of co-authorship by the Harvard Law Review and the Lampoon: he never read an email from his technology analyst that said “I have a 2nd hand read from someone at the company... Please keep to yourself as obviously not well known”. The SEC says those lines alone should have been a “red flag” that caused Cohen to investigate the basis of their knowledge.
Matt Levine revels in the absurdity:
There’s the obvious paradox of “I was too busy not reading emails to not supervise.” There’s the fact that SAC sent this memo, about how Steve Cohen never reads his employees’ emails, to those employees.
Nevertheless, Cohen’s lawyers (starting on page 25) detail the minutiae of his work habits, desk layout, screen set up, and even his Outlook preferences to demonstrate that it was almost physically impossible for Cohen to read an email laced with what he should have known to be suspicious information about Dell’s earnings. John Carney dismissively calls this the “Hamptons pool defense”, and thinks “Cohen...perhaps the best stock trader in history”, is “capable of multitasking at a very high level”.
Cohen’s lawyers also rebut the allegation that the recommendations he received from Mathew Martoma in any way indicated that Martoma had illicit information:
To the contrary, Mr. Martoma’s recommendation to reduce SAC’s exposure on a position that had appreciated approximately 40% over the previous six weeks, and that most knowledgeable observers believed had little further short-term upside, at a time of volatile and declining general market trends, was perfectly reasonable.
Felix writes that the SEC’s charges are important because they go “straight to the main way in which Cohen makes his money... It’s pretty clear that Cohen loves any trade which makes money, and has no particular compunctions when it comes to whether or not the trader in question is behaving in an entirely legal manner”. However, Kevin Roose thinks that “‘failure to supervise’ is a fairly weak charge” and “probably means the SEC has given up on finding a smoking gun linking Cohen directly to insider trading.”
Matthew Goldstein evaluates the numerous theories behind the SEC’s legal strategy, suggesting that one possibility is the SEC was motivated to charge Cohen with whatever they can, before federal prosecutors moved against Cohen or SAC later this year. -- Ben Walsh
On to today’s links:
Energy
Oil spills in Alberta have been ongoing for 6 weeks and no one understands how to stop them - The Toronto Star
Housing
First-time home buyers are increasingly getting left behind in the housing recovery - WSJ
Popular Myths
"Are Detroit’s woes the leading edge of a national public pensions crisis? No" - Paul Krugman
Revolving Doors
Former SEC enforcement chief gets a totally unsurprising $5 million payday - Ryan Chittum
Bitcoin
The SEC is charging a Texas man with running a Bitcoin Ponzi scheme - SEC
Charts
"The Great Rotation" of money into stocks is now undeniable - Josh Brown
The striking ideological divide between Northern and Southern Europe - LSE
Cephalopods
Goldman Sachs responds to metals warehousing allegations by not responding to the allegations - Goldman Sachs
Data Points
Why are Brazilians protesting? "corruption, public services...political ineptitude and the electoral cycle" - Vox EU
New Normal
Only 31% of millionaires polled by UBS consider themselves wealthy - UBS
Cosmic
Scientists are trying to build a warp drive - NYT
The Fed
Larry Summers may be the new frontrunner for Fed chair - Ezra Klein
Awesome
Explaining the commodity warehouse trade with scripture - Izabella Kaminska
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