The myth of “alpha” takes another mortal blow… SAC Capital charged by US Justice Dept

First Paulson, then Coffey, Pellegrini and now Cohen.

It seems that the “alpha” these guys generated during the go go years of the 90’s and noughties were either one hit wonders (a la Paulson) or, in Cohen’s case, perhaps a little bit too close to the other side of so called “expert networks”.

As we postulated here – http://www.spreadbetmagazine.com/blog/are-the-feds-finally-about-to-nail-steve-cohen.html on 3 July, it looks like the US SEC means business and they have charged Stevie’s firm with insider trading activities (and which is of course illegal!) going back to 1999 (strangely a period coinciding with turbo charged returns…

SAC CAPITAL ADVISORS INDICTED BY FEDERAL GRAND JURY IN NEW YORK

COHEN’S HEDGE FUND, SUBORDINATES SUBJECT OF CRIMINAL INQUIRY

SAC FOUNDER STEVE COHEN SUBJECT OF SEC ADMINISTRATIVE ACTION

U.S. JUSTICE DEPARTMENT FILES CHARGES IN MANHATTAN COURT

U.S. SEEKS TO FORCE SAC TO FORFEIT ILLEGAL PROFITS STEMMING FROM FRAUD 

U.S. SAYS THAT FROM ROUGHLY 1999 TO 2010, SAC OBTAINED AND TRADED ON INSIDE INFORMATION TO BOOST RETURNS, FEES

I think he’s gonna need those billions to prepare one heck of a defence to these charges and I can’t quite see him forfeiting $8bn quietly! Worst of all, it seems that legal opinion is that it is unlikely Stevie will be able to settle the charges too. From one of the most expensive homes in the world to a cell with “bubba”, that will be one hell of a come down if the Feds do pin it on him.