Steve Cohen won’t go to jail for illegal insider trading. Arthur Samberg didn’t go to jail for illegal insider trading but he shut down Pequot Capital. Let’s be clear. Neither Steve Cohen nor SAC Capital has been accused of anything illegal. Preet Bharara tried to tie the recent illegal insider trading cases to Stevie Cohen but he wasn’t successful and he is the one with a phenomenal track record in prosecuting hedge funds for illegal insider trading. Dealbook reports that SEC is investigating SAC’s healthcare stock transactions to determine whether they were based on illegal inside information.
SEC usually doesn’t want to send anyone to prison, they look for a settlement after the dust settles. That’s why Arthur Samberg didn’t have to deny or admit the allegations. The worst case scenario for Steve Cohen is to pay a couple of million dollars to settle all the charges. We don’t even know whether there will be any charges. The worst case scenario for SAC Capital is much worse though. If SEC charges SAC Capital or Steve Cohen for illegal insider trading, it will be the end for SAC Capital. We see this as a low probability (at most 20%) event.