Using Simple Logic To Prove That Mathew Martoma's Got Nothing On Steve Cohen

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The soon-to-be-$3.5 billion-lighter Steve Cohen, were he guilty of knowingly trading on insider information from Martoma, would seem to have a lot of good reasons to want to keep him happy. But he fired him. And, now, Bloomberg's Jonathan Weil has put two and two together.

Martoma has said he is innocent. He has refused to cooperate with the government. And if I had to make a wager on whether he is in a position to implicate Cohen, I would bet that he isn't….

Let's say, for argument's sake, that Cohen knew the whole time that Martoma's recommendations on Elan and Wyeth were based on inside information. In that case, Cohen would have been crazy to fire Martoma. (Or to let anyone else at SAC fire him.) When a supervisor conspires with an underling to commit a crime, the dumbest thing the boss can do is cast that person loose and risk angering him….

On the other hand, if Cohen had no reason to believe that Martoma's recommendations on Elan and Wyeth were based on inside information, then it would have made sense to can him for poor performance. The "one trick pony" tag would have been fitting.

Is it possible that Cohen could have been so dumb and so arrogant that he would fire and deliberately lose control over someone who was an eyewitness to his own criminal acts? I suppose it is, but I'm skeptical.

A Hedge-Fund Firing That Makes No Sense [Bloomberg The Ticker blog]
SAC Case Tests a Classic Dilemma [NYT]
SAC Sees Investors Pulling Out $3.5 Billion [WSJ]

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The Feds Are Struggling To Understand Why Mathew Martoma Won't Just Turn On Steve Cohen Already, God Damn It

"We have been remarkably successful in convincing persons to cooperate with the government, and provide evidence to us, and in court of law," SEC director of enforcement Robert Khuzami said during a press conference the day the government went public with its charges of insider trading against former SAC Capital employee Mathew Martoma. To the untrained ear, Khuzami probably appeared to be speaking to no one in particular, just sending a general message to any would-be criminals out there that once the government got to their co-conspirators, it'd be all over. No one wants to do time, and everybody flips. To those who've been following Operations Perfect Hedge, though, and have watched the Feds' relentless pursuit of Steven A. Cohen,  it was obvious they were sending a clear message to the Big Guy: "We got ya boy, and ya goin' down." And since its track record of getting people to turn on their colleagues and in some cases, their best friends (see: Noah Freeman/Donald Longueuil, and these guys, and these guys, and this guy) really has been "remarkably successful," and since Martoma has a wife and two young kids and his whole life ahead of him, Khuzami and Co. probably assumed they had this one in the bag. But not so.