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Hedge fund king Cohen’s ex says he engaged in insider trading

They parted ways 20 years ago, but super secretive hedge fund king Steven Cohen’s ex-wife is back with a vengeance, saying he cheated her out of millions of dollars, engaged in illegal trading and stonewalled federal regulators.

In stinging allegations filed in a Manhattan federal court today (Read the filing – PDF), the billionaire’s ex-wife Patricia Cohen smacked the 53-year-old with civil racketeering charges, saying he hid assets from her when they separated in 1989 and now owes her $300 million.

To Cohen, who’s worth an estimated $5.5 billion, $300 million is chump change, but the ex-wife’s charges also take a stab at his very livelihood by alleging that he confessed to illegal trading and stonewalled the Securities and Exchange Commission when it later asked about the trades.

The allegations come amid a widespread crackdown on illegal insider trading by the SEC and Justice Department. The feds have already nabbed more than 20 people, including executives from big-name firms like IBM and Ropes and Gray in what prosecutors have called the largest hedge fund insider trading case in history.

According to Patricia, who has two kids by Cohen, her ex-husband admitted to knowing about, and trading on, General Electric’s 1985 deal buy RCA Corp. before the news was made public.

At the time, she questioned him about “the legality of trading” on his information, and he assured her that what he was doing was perfectly legal.

The ex-wife identifies the insider as a former Wharton classmate of Cohen’s. She said he denied getting information from this person, insisting it was from a mutual friend and therefore legal.

One year later, the SEC investigated Cohen, who at the time was working for brokerage firm Gruntal, about his role in the transaction. No charges were brought.

According to Patricia Cohen, her husband pleaded the fifth when answering the agency’s questions about the trades.

A spokesman for Cohen, who now runs hedge fund SAC Capital Advisors, said, “These are ludicrous allegations made by a former spouse that are entirely without merit.”

“It is disgraceful that a member of the bar would assist her in what can only be considered a transparent attempt to extort money.”