Cohen Pleads the Fifth

The ongoing saga at SAC continues with the Justice Department calling Steve Cohen's bluff, and Cohen calling theirs right back at them. Cohen's attorney informed prosecutors that he would indeed invoke his Fifth Amendment right against self-incrimination if called before a Grand Jury in the SAC insider trading investigation.

With the deadline to file charges against SAC and/or Cohen fast approaching, the investigation seems to be heading into witch hunt territory. Last week the Justice Department went so far as to say they may charge Cohen even if he didn't know insider trading was going on at SAC, on the basis that he should have known. The net result is that SAC is more or less finished as a public hedge fund.

Cohen has not spoken out about the cloud surrounding his firm, which has led to billions of dollars in redemptions, which will leave SAC with very little outside capital by the end of the year. But the Times reports that Cohen recently told a senior Wall Street executive, "I sleep at night and I didn't do anything wrong, but that doesn't mean they can't ruin my business."

Nobody really wins in this scenario. A bunch of SAC employees will probably lose their jobs, and whether they get Cohen or not the company he built over the past 20+ years is finished. They may soldier on as a family office, but the pall of a government investigation is difficult to overcome in this business.

Makes me wonder if we shouldn't revisit insider trading laws. It's a different world today than it was even 20 years ago, and it is much harder to draw the line between insider trading and just plain diligent research. I've always considered it a victimless crime anyway.

What do you guys think? Will Justice charge SAC or Cohen by the end of the month? Or will they cook up some scheme to buy more time? There's no question that Cohen did the right thing by taking the Fifth, but will SAC ever recover from the presumption of guilt that implies?

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