Black Edge

Sheelah Kolhatkar, Random House, 344 pages, $28. In the late 1990s, if a bank trader had possibly profitable gossip, the first phone call would be to SAC Capital, an American hedge fund run by Steven Cohen. "Stevie" was, according to his legend, a day-trading idiot savant, a bully and a moneymaking genius who paid top dollar for trophy works of art. The efforts of regulators to jail him for insider dealing are the subject of Sheelah Kolhatkar's excellent new book, "Black Edge: Inside Information, Dirty Money and the Quest to Bring Down the Most Wanted Man on Wall Street." In the late 1990s, it became harder for investors to beat the market. Computing and brain power combined on Wall Street to find a new edge. Cohen took a different route. He set up SAC as a kind of corporate espionage agency. He paid huge commissions to banks for information. Before the financial crisis, SAC had an enviable $17 billion of assets and an average annual return of 30 percent for 18 years. Too good, concluded regulators, who laid siege to SAC to try to prove that the firm was profiting from insider information. Eventually, several traders and analysts pleaded guilty or were convicted. But Cohen always managed to be several steps away. In 2013, SAC at last agreed to say that it had engaged in fraud and closed its doors to outside money. But Cohen, who has not admitted guilt, will be free to open a new fund next year. And the banks still do business with Cohen. Unlike "Bonfire of the Vanities" and other fictional accounts, this book shows how Cohen's government pursuers were comprehensively outwitted by his lawyers.