第 1 章
Wall Street's Dirtiest Secret: The Pursuit of Black Edge
In the summer of 2008, FBI Special Agent B.J. Kang sat in a nondescript van, listening to a wiretapped call that would eventually unravel one of Wall Street's most notorious insider trading networks. The conversation between billionaire hedge fund manager Raj Rajaratnam and his associate Danielle Chiesi revealed advance knowledge of Akamai Technologies' disappointing earnings-information that would net Rajaratnam over $5 million in illicit profits. But this was just the beginning. As investigators pulled on this thread, they discovered a much bigger target: SAC Capital Advisors and its enigmatic founder Steven Cohen, whose uncanny ability to be "always on the right side" of trades had long raised suspicions. "Black Edge" became an instant Wall Street classic upon its 2017 release, with The New York Times calling it "essential reading for anyone interested in how the financial markets really work." Even Warren Buffett reportedly recommended it to Berkshire Hathaway shareholders as a cautionary tale of Wall Street excess.
第 2 章
The Rise of Wall Street's Most Feared Trader
Steven Cohen emerged from humble beginnings in Great Neck, Long Island, as one of eight children in a financially constrained household. Despite living in an affluent suburb, the Cohens struggled-a contrast that shaped young Steve's hunger for wealth. While his father ran a modest dress manufacturing business and his mother taught piano, Cohen dreamed of the financial freedom his maternal grandparents enjoyed from their investments. From childhood, he studied stock tables obsessively, developing an almost supernatural intuition for market movements.
At Wharton, while classmates partied, Cohen dominated poker games and rose early to read The Wall Street Journal. His outsider status fueled a relentless drive to outsmart his more privileged peers. In 1978, he joined small brokerage firm Gruntal & Co., where mentor Ronald Aizer recognized his extraordinary talent on day one when Cohen made $8,000 on a single stock prediction while colleagues focused on small, formulaic gains.
Cohen's trading desk at Gruntal became notorious for its volatility. He would erupt in profanity-laced outbursts-once ripping a phone from the wall and slamming it on a trader's desk-only to be friendly again minutes later. When confronted about taking another trader's assigned stock, Cohen simply replied, "Would the Yankees ask Mickey Mantle to bat eighth?" His exceptional talent made him immune to normal rules.
By the mid-1980s, Cohen negotiated an unprecedented deal with Gruntal: his own trading group with 60% of profits, $8-10 million in capital, and complete autonomy. He filled his operation with friends and family while imposing peculiar habits like arctic office temperatures and ripping up carpeting that distracted him. His trading prowess was legendary-during the 1987 market crash, while others panicked, Cohen calmly took control, telling his traders, "From now on, no one is trading but me."
第 3 章
Building an Empire on Information Advantage
In 1992, Cohen left Gruntal & Co. to launch SAC Capital with $23 million in capital and nine employees. His departure marked the beginning of what would become one of Wall Street's most powerful hedge funds. Within three years, the fund quadrupled to almost $100 million, generating such massive trading volume that brokers feared missing out on commissions, even as whispers circulated that Cohen's reported 100% annual returns seemed impossibly high. His trading strategy centered on quick decisions and rapid-fire execution, often holding positions for just hours or days.
Recognizing his own social limitations, Cohen made a crucial strategic hire in Kenny Lissak, a charismatic stock salesman whose gregarious personality complemented Cohen's introverted nature. Lissak became instrumental in building vital relationships with brokers and securing privileged access to institutional research. This partnership exemplified Cohen's talent for surrounding himself with people whose strengths offset his weaknesses.
Cohen's personal life during SAC's ascent was marked by dramatic changes and internal struggles. His divorce from first wife Patricia turned into a bitter legal battle over assets, highlighting the growing scale of his wealth. His subsequent marriage to Alexandra Garcia, a single mother from Spanish Harlem, culminated in an opulent Plaza Hotel wedding that became the talk of Wall Street. Despite amassing extraordinary wealth, Cohen grappled with persistent unhappiness and anxiety, leading him to hire psychiatrist Ari Kiev. Their sessions focused not just on personal therapy but on developing psychological frameworks to help traders manage risk and overcome emotional barriers to performance.
By 1998, SAC had achieved unprecedented influence on Wall Street, becoming Goldman Sachs' largest commission generator in the equity division. This shift marked a fundamental change in Wall Street's power dynamics, as hedge funds supplanted traditional mutual funds as the most coveted clients. SAC's massive trading volume gave them extraordinary leverage, which they used to demand preferential treatment - including early access to analyst reports, advance notice of rating changes, and first calls on trading opportunities. While these arrangements made some analysts and compliance officers uncomfortable, they reflected the new reality of hedge funds' dominance in the market.
Cohen's ruthless pursuit of his objectives was perfectly illustrated in his acquisition of a Greenwich mansion. When Bear Stearns partner Bobby Steinberg competed for the same property, Cohen demonstrated his characteristic combination of playful arrogance and overwhelming force. After Steinberg offered him $1 million to walk away from the deal, Cohen suggested they flip a coin instead, then simply crushed the competition with a $14.8 million cash offer. The subsequent renovation of the property into a 36,000-square-foot compound - complete with an indoor basketball court, a glass-domed swimming pool, and an ice-skating rink with its own Zamboni - became a physical manifestation of Cohen's philosophy that no desire was too extravagant and no obstacle insurmountable. The property's transformation reflected both his enormous wealth and his determination to create exactly what he envisioned, regardless of cost or complexity.
第 4 章
Murderers' Row: The Quest for Edge
Between 1998 and 1999, SAC reached a significant milestone by surpassing $1 billion in assets. This growth created challenges for Cohen's trading approach, as his day-trading strategy became increasingly difficult to execute with hundreds of millions under management. With competition intensifying, Cohen announced a strategic shift: he would only hire traders with a "fundamental edge"-deep expertise or connections in particular industries.
Cohen seated his best traders close to him in what became known as "murderers' row." The constant need to hire new talent became a significant challenge, as Cohen regularly fired dozens of people for failing to deliver desired returns. Despite the high-stress environment, candidates eagerly sought positions at SAC for the potential to earn life-changing wealth.
Solomon "King Midas" Kumin led recruitment efforts, searching for traders with personal connections to public companies that might yield valuable intelligence. In 2004, a young employee named Matthew Grossman approached Cohen with the idea of creating an exclusive research-driven trading unit called CR Intrinsic. Though disliked by most colleagues, Grossman received Cohen's blessing to build this "top gun" unit, which would take a more studious, longer-term approach to investing.
Working at SAC meant enduring constant stress and uncertainty. The office layout and hierarchy underwent continuous reshuffling, with entire desks or departments disappearing without explanation. This environment of perpetual insecurity hung over every portfolio manager, but also created opportunities for advancement.
By early 2008, as the recession deepened, SAC reached its peak with 1,200 employees and nearly $17 billion in assets. The firm's extravagance was legendary-the parking lot filled with luxury vehicles, masseuses on staff, and Cohen's billion-dollar art collection adorning the walls, including a frozen blood sculpture and Damien Hirst's famous shark in formaldehyde.
第 5 章
The Corruption of Medicine: How Wall Street Infiltrated Drug Trials
The medical profession was being rapidly infiltrated by Wall Street. By 2005, nearly 10% of American doctors had financial ties to investors-a 750% increase since 1996-in what one journal called "likely unprecedented in the history of professional-professional relationships." Into this environment came Mathew Martoma, a quiet, Stanford MBA-educated biotechnology specialist recruited to join SAC's new CR Intrinsic division.
Martoma focused intensely on researching Elan Corporation and Wyeth's Alzheimer's drug bapineuzumab, leveraging expert network firm Gerson Lehrman Group to connect with medical professionals involved in the clinical trials. Through GLG, Martoma reached out to Dr. Sid Gilman, chair of the Safety Monitoring Committee for the bapi trial, who was earning hundreds of thousands annually consulting for hedge funds.
Though not flashy, Gilman began enjoying small luxuries like first-class flights and car services. His consulting work increasingly consumed his time and became a secret life separate from his academic career. While Gilman avoided investing in pharmaceutical stocks to prevent conflicts of interest, he eventually crossed ethical lines with Martoma.
Martoma had cultivated a father-son relationship with Gilman, who was reminded of his estranged son. Despite signing strict confidentiality agreements as chair of the safety monitoring committee for bapineuzumab, Gilman began sharing confidential information about patient reactions and side effects with Martoma.
At SAC, Martoma's enormous positions in Elan and Wyeth sparked internal controversy. Another healthcare team believed bapi would fail and questioned the risky investment. Despite challenges from analysts David Munno and Benjamin Slate, Cohen trusted Martoma's judgment, saying "Mat is closest to it." When analysts complained that Martoma was telling people he had "black edge" on Elan and Wyeth, they were using SAC's internal categorization system: "white edge" (publicly available information), "gray edge" (potentially problematic), and "black edge" (clearly illegal).
第 6 章
The Quarter-Billion Dollar Trade
As the financial crisis deepened in early 2008, SAC maintained enormous unhedged positions in Elan and Wyeth based on Martoma's confidence. To strengthen Cohen's conviction, Martoma arranged a private dinner with Elan's CEO Kelly Martin at Cohen's Greenwich mansion. After the meeting, Cohen felt Martin seemed too subdued for someone about to solve Alzheimer's.
When Elan and Wyeth announced "encouraging top-line results" from Phase II trials on June 17, 2008, Martoma was vindicated. "Yee-haw. Well done," Cohen responded, gloating to Munno, "Round 1 to Martoma." SAC immediately purchased hundreds of thousands more shares, building positions worth over $700 million.
Three weeks before the International Conference on Alzheimer's Disease where final results would be announced, Gilman was selected to present the bapi data. On July 15, Gilman flew to Elan's facility in San Francisco where the data was "unblinded" after being reminded of confidentiality requirements.
When Martoma visited Gilman's office that Saturday, Gilman showed him the presentation on his computer. While Gilman remained enthusiastic about the drug's potential, Martoma could clearly see the results would disappoint investors-bapi was effective for only a small sub-group of patients.
Immediately after returning from Michigan, Martoma contacted Cohen early Sunday morning, calling it "important." They spoke for twenty minutes, after which Cohen promptly instructed his top trader Phillipp Villhauer to quietly sell Elan shares through "low visibility" accounts.
Over nine days, Cohen's traders sold 10.5 million Elan shares and liquidated their Wyeth position, operating through "dark pools" where trades executed anonymously. Cohen then reversed his position entirely, shorting 4.5 million Elan shares worth $960 million. The massive position flip occurred with extreme secrecy-"Obviously no one knows except me you and Steve," Villhauer assured Martoma.
Ironically, the same day the selling began, former SEC chairman Harvey Pitt arrived at SAC to deliver insider trading training. While cameras broadcast his presentation to satellite offices, Cohen himself was conspicuously absent-unusual behavior that Pitt found strange compared to other firms where CEOs typically sat front row.
When the devastating Elan results were announced, the stock plummeted from $33 to below $10 within days. The trade saved SAC hundreds of millions while devastating other investors. "Stuff that legends are made of," one SAC employee later messaged a friend, unaware of the illegal information that had fueled the trade.
第 7 章
The Informant: How the FBI Built Its Case
On a cold January evening in 2009, FBI agents intercepted Jonathan Hollander walking home from his Tribeca gym. They confronted him about alleged insider trading at SAC Capital, showing him a face chart with Steve Cohen at the center and claiming they already had three informants inside SAC. This was just one of many approaches as the FBI's investigation into insider trading employed sophisticated behavioral assessment techniques.
FBI Agent B.J. Kang was deeply immersed in the Raj Rajaratnam investigation, which had expanded to dozens of Wall Street traders. The investigation followed a productive pattern: flip a cooperator, gather evidence against another trader, obtain a wiretap, and repeat. By March 2009, prosecutors were confident they could convict Rajaratnam but debated how many others they should pursue before making arrests, knowing that arresting Raj would alert their ultimate target, Steven Cohen.
When C.B. Lee was caught wiring payments to sources for inside information, agents confronted him with a stark choice-cooperate or face prosecution. Lee provided crucial insights into SAC Capital's operations, describing it as a bicycle wheel structure with Cohen at the hub and portfolio managers as spokes, each competing against others to provide Cohen with profitable trading ideas. The teams rarely shared information with each other, only with Cohen, who became furious if traders made moves before informing him.
Lee explained that getting inside information was implicitly expected, with the fund organized to insulate Cohen from knowing how traders obtained their information. Ideas were filtered through layers and assigned conviction codes before reaching Cohen. Though Lee's specific trade information was too old to prosecute, his insights into Cohen's operation proved revelatory to Kang, especially when combined with other Wall Street sources describing SAC as "dirty."
The investigation faced a critical juncture: pursue Rajaratnam and his associates, or expand to tackle the systemic corruption in Wall Street's hedge fund industry. Two promising avenues emerged: investigating expert network firms like Primary Global Research (PGR), which connected investors with company employees and appeared to facilitate inside information exchange, and pursuing Steven Cohen's SAC Capital.
第 8 章
The Prosecution's Dilemma: Catching the Whale
As the FBI arrested traders from Diamondback and Level Global, Dr. Sid Gilman began cooperating with prosecutors, revealing his meetings with Martoma about the bapineuzumab trial. Despite the mounting investigation, Steve Cohen continued his high-profile lifestyle, spending $20 million on a stake in the New York Mets and attempting to buy the Los Angeles Dodgers.
When Cohen was questioned about the suspicious Elan trades, he claimed Martoma had simply become "uncomfortable" with the position, concealing the critical Sunday night conversation that followed Gilman's data reveal. Cohen projected confidence even as the investigation closed in, maintaining his billionaire lifestyle while his former traders faced prosecution.
In August 2009, SEC attorney Sanjay Wadhwa discovered a FINRA referral that had been ignored for nearly a year regarding SAC's suspicious trades in Elan and Wyeth stocks before the Alzheimer's drug announcement. The trades had generated an estimated $182 million in profits and avoided losses-far exceeding the $55 million identified in the Rajaratnam case.
By early 2011, SEC lawyer Charles Riely finally identified the mysterious SAC trader in the Elan case as Mathew Martoma after receiving Sid Gilman's phone records. The records revealed dozens of calls between the doctor and Martoma, connecting all the pieces of the massive financial fraud. Despite this breakthrough, SEC's Sanjay Wadhwa was frustrated that the U.S. Attorney's Office hadn't assigned a prosecutor to this significant case that potentially implicated Steve Cohen himself.
With mounting pressure from Senator Charles Grassley, prosecutors finally agreed to pursue the Elan case. FBI agent B.J. Kang discovered that "Mathew Martoma" was actually born Ajai Thomas and had mysteriously left Harvard Law School. In August 2011, Kang approached Dr. Gilman, who initially denied sharing confidential information with Martoma despite overwhelming evidence. Kang made his ultimate goal clear: "Dr. Gilman, you are only a grain of sand. So is Martoma. The person we're really after is Steven Cohen."
第 9 章
The Secret Past of Mathew Martoma
Mathew Martoma's troubled past began with his immigrant parents' high expectations. Born Ajai Mathew Mariamdani Thomas to Indian Christian parents, Martoma faced intense pressure from his father Bobby, who dreamed his son would attend Harvard and cruelly presented him with a plaque reading "Son Who Shattered His Father's Dream" when he attended Duke instead.
At Duke, Martoma excelled academically while cultivating influential male mentors who served as surrogate father figures. After graduation, he worked at the National Institutes of Health on the National Genome Project. When Martoma was finally accepted to Harvard Law School, his father was ecstatic, driving him from Florida to Massachusetts in a U-Haul.
During his second year at Harvard Law, Martoma's grades began slipping. Desperate for a prestigious clerkship, he meticulously altered his transcript, changing B grades to As, and applied to twenty-three judges. After impressive interviews with D.C. Circuit Court judges, one offered him a position. However, a clerk noticed discrepancies in his transcript and alerted Harvard.
During Harvard's three-month investigation, Martoma and his family concocted an elaborate story claiming he created the fake transcript only to show his demanding parents. The administrative board found his explanations implausible and evasive, noting he was "under extreme parental pressure to excel academically," and expelled him in May 1999.
Undeterred, Martoma plotted his reinstatement, convincing his father to take out a second mortgage for $1 million to launch Computer Data Forensics, a company designed to authenticate the disputed email dates. After Harvard rejected his reinstatement, the company quickly burned through the million dollars from Martoma's father, who flew to New York and told his son he was a "complete liability."
After his business failure, Martoma applied to Stanford's prestigious MBA program, seeking to reinvent himself in finance. Shortly before starting at Stanford, Martoma legally changed his name from Ajai Mathew Mariamdani Thomas to Mathew Martoma, completing his transformation and erasing his troubled past.
第 10 章
Justice and Its Limitations
Despite his company's indictment, Cohen maintained his routine, arriving at SAC's offices by 8 AM daily to trade as usual. Remarkably, major Wall Street banks like Morgan Stanley, JPMorgan Chase, and Goldman Sachs continued doing business with him despite SAC being branded a criminal enterprise. As Goldman's president Gary Cohn put it: "They're an important client to us. They're a great counterparty."
By September 2013, prosecutors approached Cohen's lawyers about settling the case. For both sides, a trial presented significant risks-humiliation for the government if they lost, and unwanted exposure for Cohen. Two months later, they reached a deal: SAC would plead guilty and pay $1.8 billion (effectively $1.2 billion after crediting $616 million already committed to the SEC).
On November 8, Cohen's legal team appeared in a packed Manhattan courtroom, though Cohen himself was notably absent. Peter Nussbaum, SAC's legal counsel, doubled over from a recent appendectomy and stress, represented the firm. When Judge Laura Taylor Swain asked how SAC pleads, Nussbaum rose halfway from his chair and answered: "Guilty." Nussbaum expressed "deep remorse" while acknowledging: "This happened on our watch, and we are responsible for that misconduct."
Meanwhile, Mathew Martoma faced his own judgment day. Despite his defense team's efforts, Judge Gardephe showed little sympathy, noting that Martoma had chosen a destructive path. In a stunning moment during testimony, Dr. Gilman revealed what FBI agents told him when they first approached him: "The agent also mentioned that I am only a grain of sand, as is Mr. Martoma. They are really after a man named Steven A. Cohen."
At sentencing on September 8, 2014, Judge Gardephe reviewed the damning evidence and concluded: "It is much more likely than not that Cohen did, in fact, receive material, non-public information from Martoma." Though Cohen was never charged, the judge's statement directly implicated him in Martoma's crime. Despite acknowledging that Martoma had been "ruined by this prosecution," the judge imposed a nine-year prison sentence.
第 11 章
The Aftermath: How the System Failed
Eight months after Martoma's sentencing, Steve Cohen attended a high-profile Christie's auction, selling one piece from his collection while demonstrating his continued financial dominance. Despite the legal storm, Cohen had methodically rebuilt his reputation-changing SAC Capital to Point72 Asset Management, replacing key executives associated with the scandal, and hiring a former Connecticut U.S. Attorney as general counsel.
The legal system ultimately delivered a stunning rebuke to Bharara's insider trading prosecutions. In December 2014, an appeals court overturned the convictions of Todd Newman and Anthony Chiasson, ruling that traders receiving second-hand information must know about the tangible benefit received by the original tipper. This "Newman decision" effectively legalized SAC's don't-ask-don't-tell information model, forcing prosecutors to dismiss charges against Michael Steinberg and other defendants.
By January 2016, the SEC quietly settled its case against Cohen with only a two-year ban on managing outside money, leaving him free to return to the hedge fund business in 2018. Meanwhile, many prosecutors who built the case against Cohen moved to lucrative private sector jobs-including Amelia Cottrell, who joined the firm of Cohen's longtime defense counsel, demonstrating the revolving door between government enforcement and the financial industry it regulates.
The financial industry has evolved to be so complex that large parts remain beyond regulators' reach. Despite Justice Department promises to hold individuals accountable after the 2008 financial crisis, little changed. Cohen emerged from his legal troubles as one of the world's wealthiest men, with the evidence against him never presented to a jury.
What does this tell us about our financial system? Perhaps that when it comes to Wall Street's most powerful players, even the most determined prosecutors face nearly insurmountable challenges. The pursuit of "black edge"-the illegal information that gives traders unfair advantage-continues today, just with more sophisticated methods and greater precautions. As one SAC trader observed: "No one ever got the better end of a deal with Stevie Cohen." Not even the United States government.
