To Catch a Trader

The $8 billion fortune amassed by the hedge fund titan Steven A. Cohen was stunning: a 35,000-square-foot mansion on Connecticut’s “Gold Coast”; a $62 million beach house in the Hamptons; a $115 million duplex in New York City, furnished with some of the world’s most valuable art.

Was Cohen’s firm, SAC Capital, simply smarter than the other players on Wall Street? Or, as the U.S. Justice Department began to suspect, was there another explanation for how SAC managed to beat the stock market and bring in sky-high returns for Cohen and his investors year after year?

Drawing on exclusively obtained video of Cohen, FBI wiretaps of other hedge fund traders, and interviews with both Wall Street and Justice Department insiders (including U.S. Attorney Preet Bharara, the “sheriff of Wall Street”), To Catch a Trader traces the rise of Cohen’s empire and goes inside the government’s ongoing, seven-year crackdown on insider trading in the hedge fund industry.

As FRONTLINE reports, since prosecutors first set their sights on the hedge fund industry, the FBI’s crackdown has uncovered institutional, widespread malfeasance.

As one agent tells FRONTLINE, “We likened it to the first Jaws movie, that we’re ‘going to need a bigger boat.’”

To date, the government has convicted 77 people of securities fraud and conspiracy. In November 2013, SAC Capital agreed to plead guilty to what prosecutors called “insider trading that was substantial, pervasive, and on a scale without precedent in the history of hedge funds.” Under an agreement still pending a judge’s approval, the firm will cease to operate as a hedge fund and will pay a $1.8 billion penalty.

Steven Cohen has not been charged with insider trading; he instead faces civil charges brought by the Securities and Exchange Commission for allegedly failing to supervise his employees and prevent misconduct.

U.S. Attorney Bharara tells FRONTLINE that the government’s investigation into insider trading at hedge funds will continue.

“Our responsibility and obligation is to make sure that everybody understands that no one is above the law,” Bharara says. “That it doesn’t matter who you are, how much money you have, who you’re connected to, you have to play by the same rules as everyone else.”