Billionaire investment honcho Steve Cohen was accused today of failing to supervise two top traders who are going to trial for insider trading.
The civil action, the first against the hedge fund mogul, could lead to the 57-year old Greenwich, Ct., moneyman being barred from managing investor money.
The lawsuit was filed by Mary Jo White’s Securities and Exchange Commission, which earlier this year settled an insider trading probe against Cohen’s SAC Capital Advisors in which the firm paid a whopping $615 million.
SAC did not admit or deny guilt in settling the matter.
Cohen hedge funds manage around $15 billion, including roughly $7.5 billion of which is his personal money and would not be affected by an industry ban.
In the latest suit, Cohen “failed to take reasonable steps to investigate and prevent” securities violations by former portfolio managers Mathew Martoma and Michael Steinberg — both of whom are facing trial in the coming months, it is alleged.
A spokesman for Cohen said the suit “has no merit.”
“Steve Cohen acted appropriately at all times and will fight this charge vigorously,” he said, citing “Cohen’s strong support for SAC’s compliance program.”
Martoma, a former trader in SAC’s CR Instrinsic unit, stands accused of helping SAC earn a whopping $276 million trading Elan Corp. and Wyeth based on tips he allegedly gleaned from a doctor overseeing the companies’ joint clinical drug trial.
Steinberg, who worked at SAC’s Sigma Capital unit, is facing trial in November for trading shares of Dell and Nvidia on allegedly illegal tips he received from his analyst Jon Horvath, who has pleaded guilty and agreed to cooperate.
In both cases, Cohen was aware of suspicious trading activity and yet did nothing to stop it, the SEC said.
For example, in late August, 2008, Cohen sold 500,000 shares he had in Dell after receiving a “highly suspicious email” from Steinberg’s analyst Horvath suggesting the computer maker’s shares were set to tank.
“I have a 2nd hand read from someone at the company,” Horvath wrote to a third SAC employee, Gabe Plotkin, who was — like Cohen — betting Dell shares would rise. Horvath said his insider was expecting disappointing gross poor gross margin numbers in the upcoming quarterly results.
“Please keep to yourself as obviously not well known,” he told Plotkin, who then forwarded Horvath’s email on to a research trader at SAC whose job it was to keep Cohen appraised of trading-related information worthy of attention.
The research trader sent the email at 1:29 pm on August 25 to Cohen’s home and office email addresses. The two then spoke a few minutes later, at 1:37, for 48 seconds on Cohen’s cell phone. By 1:39 p.m., Cohen began selling shares of Dell and sold everything before 4 p.m. that day, the complaint alleges.
After the markets closed on Aug. 28, Dell announced its second quarter financial results, gross margin results that were substantially worse what analysts had expected.
Three hours after Dell’s announcement, Cohen emailed Steinberg: “Nice job on Dell,” the SEC said.
kwhitehouse@nypost.com