Business

The amazing rise and fall of SAC’s Steve Cohen

When Steve Cohen’s lawyers walk into Judge Richard Sullivan’s courtroom Wednesday morning, it will be the beginning of the end of one of the most glorious — and sullied — money-making chapters in the history of Wall Street.

The conference between SAC and the government is the next step in working out the details of a guilty plea to insider trading announced by Manhattan US Attorney Preet Bharara on Monday.

The hedge-fund mogul has agreed to turn over $1.8 billion and shut his funds to outside investors after admitting that SAC Capital engaged in criminal activity.

Cloaked in secrecy, hedge-fund managers became the titans of finance over the past decade, dominating the markets and achieving unparalleled paydays.

But few were more idealized than Cohen, who started out with $25 million in 1992 and, in less than two decades, amassed a fortune of at least $9 billion.

A trader and gambler at heart, Cohen gained almost mythic status because of the size of his returns.

Over two decades, he charged investors a 50 percent fee, which meant that to continue to provide them lofty double-digit returns, he had to earn twice that much.

SAC’s two best years were 1999 and 2000, with gross returns of 138 percent and 144 percent, respectively.

During three years out of the past 21, Cohen was able to double the money he managed. He had only one losing year, in 2008.

“He was a giant among giants,” said one former investor, saying that despite the “ever-present cloud over Cohen’s head,” greed overcame skepticism for most investors.

Cohen’s assets never again reached 2008’s $16 billion peak. But he bounced back after the financial crash, raising $1.3 billion from investors in 2010, even as the feds began circling.

Bharara began his massive insider-trading probe in the hedge fund industry in 2009. By 2011, the investigation began to touch on actions inside SAC.

When he announced insider-trading charges against SAC this summer, Bharara said the firm was a “magnet for cheaters” between 1999 and 2010 — years when the firm grew from less than $1 billion to $12.75 billion.

Even as Cohen returns some $6 billion to investors as part of the guilty plea, he’ll be managing more money in his new family office than he did at the end of 2004. That’s more than the vast majority of law-abiding hedge funds will ever see.