Black Edge — Sheelah Kolhatkar
“Cohen was a pioneer, the creator of a trading empire designed to gain an edge over less sophisticated investors. Years later, after paying the largest fines in the history of financial crime — Cohen emerged from the crisis that engulfed his company as one of the world’s wealthiest men.”
Kolhatkar does a decent job describing the winding tale of the demise (if you could call it that) of billionaire Steve Cohen’s hedge fund SAC Capital — now Point72. It details Steve Cohen’s ruthlessness, his unrelenting drive for success, and how those traits, among others, led him to become a star trader and one of the richest men in the world. I think the author explains financial jargon well enough for those less familiar with the terms, although I would have enjoyed had she gotten more into the details of both the information involved and trade execution. I had previously read multiple articles about the fall of SAC, Cohen’s backstory, and the trial of his analyst, Matthew Martoma, but it seemed a lot of people enjoyed this book so I decided to check it out and revisit the subject.
It’s certainly a solid piece investigative journalism, there’s no doubt about that. The story is really one that is just begging to be written, so it’s hard to mess it up on a large scale. There is so much drama involved, from the pressures that led many of these hedge fund analysts to commit white-collar crimes to heated or nerve-racking interactions with FBI agents — it’s hard not to get sucked in. However, while the story itself is fascinating, I didn’t find Kolhatkar’s telling of it particularly impressive. Her writing is somewhat simple and maybe a little predictable; there’s no stylistic flair that sets it apart from any article you might have read about the subject in Businessweek. And where as the character portraits in some of Michael Lewis’ books were impressive and compelling, I felt Kolhatkar’s were pretty cliched and didn’t really get past surface-level descriptions for most of the cast. But who knows, maybe a lot of the people involved in this story (Cohen included) are the prototypical greedy financiers that we can all imagine. I had hoped there would have been slightly more depth.
Anyway, the book is mostly about how Martoma uses inside information extracted from a respected doctor to make SAC almost a quarter of a billion dollars. It details the efforts he goes to to essentially manipulate an old man in order to get extremely important information that would drive the prices of two pharmaceutical companies Elan and Wyeth, which Martoma passes along to Cohen. This trade, among others, eventually leads to the FBI and the SEC attempting to get Cohen — the whale of the hedge fund industry — on insider trading charges. There’s politics, drama, and personal struggles on multiple fronts.
Even if you’re not quite interested in stories related to markets or finance, I’d say this is one worth checking out. Personally, I thought Den of Thieves was more well-written, suspenseful, and more accurately portrayed the moral dilemmas the characters struggled with. It’s always fascinating to see how far people will go to rationalize immoral behavior when large sums of money are on the line. You realize that even decent people can succumb to large enough incentives. On the other hand, a lot of people involved in these stories don’t sound too decent to begin with, and it’s not hard to imagine a jury deciding any one of these white-collar criminals deserve jail time.
The ending to one part of this story also interested me. Many of the lawyers and government officials who spent years trying to get Cohen on these charges eventually moved to much more lucrative positions in the world — general counsels for hedge funds, reputable practices that defend hedge funds, or some other types of well-paid consulting. These people were portrayed as the ones who were fighting for justice, equality, and the integrity of our financial system. They seemed to be against all that Cohen stood for — excessive wealth, deceit, disloyalty, and disregard for the law. And yet, they too were eventually lured by large pay packages, some of them even indirectly working for Cohen himself. While I can’t blame them for wanting to escape the (probably) thankless work of a public servant, it is certainly a very interesting statement on human nature.
· It was as if the whole spectacle was so painful for him that his soul had departed his body, leaving behind an empty shell in a pressed suit.