American Scandal

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Every scandal begins with a lie. But the truth will come out. And then comes the fallout and the outrage.

Scandals have shaped America since its founding. From business and politics to sports and society, we look on aghast as corruption, deceit and ambition bring down heroes and celebrities, politicians and moguls. And when the dust finally settles, we’re left to wonder: how did this happen? Where did they trip up, and who is to blame? From the creators of American History Tellers, Business Wars and Tides of History comes American Scandal, where we take you deep into the heart of America’s dark side to look at what drives someone to break the rules and what happens when they’re caught. Hosted by Lindsay Graham.

The FBI vs. the Hedge Fund | A Game of Poker | 1

The FBI vs. the Hedge Fund | A Game of Poker | 1

Tue, 15 Mar 2022 07:01

Steven Cohen wants to escape his small life on Long Island. The destination in sight: Wall Street.

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To listen to American scandal one week early and add free, join Wondry Plus in the Wondri app. Download the Wondri app in your Apple or Google Play mobile app store today. It's the evening of November 8, 2011, and BJ Kang is driving down a suburban street outside Boca Raton, Florida. Kang is an FBI agent with a short crew cut and a form fitting suit. As he drives through Southeast Florida, he gays his out at the palm trees, swaying in the warm evening breeze. Tonight, Kang is over a thousand miles from his office in Manhattan, but he's not here on vacation. Kang and his partner at the FBI are looking for the home of a former Wall Street trader named Matthew Martoma. A man they believe is guilty of financial crimes. Soon, Kang reaches a two story mansion at the end of a cul<|nl|><|translate|> It's built like some Spanish castle, the kind of place that comes with marble floors and an elevator. And while Kang's never been inside, he already knows what the interior looks like. Because for five years, Kang has been investigating Martoma. He knows almost everything there is to know about the former trader. And what it all comes down to is that Martoma broke one of the most important rules on Wall Street. He engaged in insider trading, a crime that could send him to prison. But tonight, Kang is not here to make an arrest. Because even though Martoma committed a felony, the former trader could play a key role in a much larger investigation. Kang is hoping that he can get Martoma to flip to rat out his old boss, a man named Stephen Cohen. Cohen is the biggest hedge fund trader in the United States and he appears to be gaming the market, taking a узнаziaconging how this case that is a man stepped on partnership that helped completely by the case by who might be investing in the After ringing the doorbell, Kang waits. A minute passes with no answer. So he rings the doorbell again. It doesn't seem like anyone's home, but they've come too far to turn back now. So Kang and his partner stand on the front steps, waiting an hour passes. The Kang starts to feel himself losing patience. But then a car pulls into the driveway, and a man with short cropped black hair steps out alongside his wife. Can I help you? Yes, Mr. Martoma. I'm special agent BJ Kang. We're from the FBI. We'd like to speak with you about a former business associate, FBI. It's not really a good time. Mr. Martoma, I'm afraid I can't wait. We need to speak to you about something sensitive, and we should probably go somewhere private. What's this all about? We're here because you worked for SAC Capital from 2006 to 2010. That's correct, right? Yeah, that's right. I was a trader. And you worked for Stephen Cohen in the firm's health care division. Yeah, that's right, too. But that was a long time ago. I moved on from Cohen in SAC. So what is this about, really? Kang exchanges looks with his partner. It's time to show his clients. Mr. Martoma, we're here to talk about insider trading. We know about the Wyeth and Elon trades. We know you sold your shares just in time, made a large profit. And we know your tips came from someone on the inside. What? No, I'm sorry. Could you just... Martoma leans against the doorway, suddenly looking fatigued. Mr. Martoma, are you OK? I'd like to sit down if I'm not. I'm not. But Martoma doesn't finish getting his words out. His eyes go glassy, and suddenly he faints and collapses. Mr. Martoma, Matthew, Matthew. Can you hear me? Kang tells his partner they might need an ambulance. Martoma might have just suffered a stroke or a heart attack. And if he did, it's not just Martoma's life that's in danger, he could imperil Kang's entire investigation. But just as his partner is about to dial for the ambulance, Kang notices Martoma's eyelids begin to flutter. Then they open and Kang smiles. His potential informant is going to be fine. He must have been overwhelmed with the accusation. His own body has all but admitted the truth. But Kang will be careful and further questioning. He can't have Martoma faint again. Still, if all goes according to plan, by the end of this evening, Kang will have more than enough information to go after Stephen Cohen, his hedge fund, SAC Capital, and the illegal financial empire they've built. American scandals sponsored by Sachi Art. I'm lucky. Not only is my wife beautiful, funny, and smart, she also has great taste that matches mine, which has made decorating our home together a delight. But how do we go about finding the art for our home? Well, we agree on that, too. Sachi Art. They have artworks from thousands of emerging artists around the globe in all styles. So you're guaranteed to find art that fits your style, space, and budget. Their view your room feature lets you visualize the art on your walls. And my advisor, Siting, was instrumental in finding our newest piece. Get 15% off your first order with promo code podcast. Just go to and enter code podcast at checkout. Find art you love today. Lots of people don't know it, but autumn is an ideal time to plant. Shorter days and cooler nights create ideal conditions for the plants to get established. If you're looking to spruce up your home, proven winners color choice shrubs has an amazing selection of flowering shrubs and evergreens for planting and gardens and landscapes. With around 320 different proprietary varieties, including classics, limelight, hydrangea, and little Henry sweet spire, all of their shrubs are trialed and tested for eight to 10 years to ensure they outperform anything else on the market. Look for proven winners color choice shrubs in the distinctive white containers at your local garden center. Learn more and find a local retailer at slashwondry. From Wondry, I'm Lindsey Graham, and this is American Scandal. The 1980s and 90s were a boom time for traders on Wall Street. Some investors grew staggeringly rich and the American economy expanded at record base. But one firm, SAC capital advisors distinguished itself from the pack. Year after year, this hedge fund produced mesmerizing profits. Other investors on Wall Street couldn't figure out the secret behind the success at SAC and how Stephen Cohen, the hedge funds founder, became one of the most powerful men in finance. But in a world where good intelligence can help produce huge returns, rumors began that Cohen had a network of insiders who traded him secret information, helping him become a billionaire multiple times over. Cohen's winning streak wouldn't last forever. The FBI and other government agencies began a year's long investigation into Cohen and insider trading, culminating with a series of high stakes trials. In the eyes of the public, it was a test to see whether Wall Street could actually be policed. But before he faced off against the authorities and before the world grappled with the huge power of hedge funds, Stephen Cohen was a young man with a talent for numbers and a burning desire to win. This is Episode 1, a game of poker. It's the early 1970s and a humid day in Great Neck, New York. Stephen Cohen is about to head into a senior year of high school. But today, he stuck working a summer job, stocking shelves at the Bohak supermarket. And he asked to be on his feet for hours, going aisle to aisle, sticking price tags on cans of corn, boxes of cereal, and stacking them on the shelves. It's mind numbing work. But it's not the worst job because it gives Cohen time to think about the one thing that truly matters to him, winning a poker. As he stacks cans in his head, Cohen begins dealing imaginary hands of cards, trying to figure out how to win. For Cohen, there's nothing like poker. He loves to compute numbers and probability, and the thrill of getting it right is like an addiction. But Cohen also knows he has a special gift. He can spot the other players tells the hidden language of the body, size, and frowns, nerve is tapping on the table. And while he has a strong intuition, Cohen also knows that to win at poker, you need an informational edge. And that's why he keeps playing imaginary hands in his head, trying to game out all possible outcomes, practice, and probability make perfect. And that matters because tonight, Cohen is going to meet with some of the neighborhood guys. They often stay up gambling until dawn. A lot of money gets exchanged. And Cohen wants to win as much of it as he possibly can. Cohen is playing through another imaginary hand in his head when suddenly his train of thought is interrupted. The floor manager of the grocery store appears in front of Cohen, wreaking of cigarette smoke. He grabs a price gun out of Cohen's hand. And with a look of frustration, he points out that the cans are mislabeled. Cohen got the price wrong. Cohen wins this. It isn't like him to make a careless mistake like that. He tries to plate off, joking that his brain is a bit mushy after all the repetitive work. But the manager doesn't smile. Instead, he warns Cohen that he needs to be more careful, or he'll find he's out of a job. The Cohen laughs at the threat. It sounds like a bluff. The floor manager repeats himself though. Cohen cannot slip up. It may seem like a matter of Nichols and Dimes, but it adds up to real money for the grocery store. Cohen is about to make another wise crack, but the floor manager turns and stalks off, leaving him alone with stacks of mispriced canned food. Cohen returns to work, knowing full well that the manager is right. Nichols and Dimes do add up to real money, at least here in a place like Great Neck. Even when Cohen wins big at poker, he only takes home a few extra dollars, small amount of spending money. It's nothing life changing. Nothing, like the kind of money, Cohen knows you can make across the river in Manhattan. Cohen starts slapping new price tags on each can of corn, but with his hands aching and his mind turning again to numbers, Cohen makes a promise to himself. He's gonna get through this summer, and he's gonna start and finish his senior year of high school. But then, he's gonna find his way into Manhattan and start playing for real money. It's 1976, and Stephen Cohen crosses a busy street in downtown Philadelphia. He arrives in front of an office for Merrill Lynch, the financial services company. It's an unassuming building, but behind a large window is something that catches Cohen's eye, a stock ticker, and spitting out a list of today's stock prices on a ribbon paper. These days, Cohen is studying at the Wharton Business School at the University of Pennsylvania. He's working to get a degree in economics, hoping that this diploma would be a golden ticket into the world of business and finance. But Cohen hasn't gone to a lecture in over a week. The papers, the historical case studies, none of it feels relevant, not when there's a real world out there, with real businesses and million dollar deals happening every day. So Cohen has let go of the idea of being a student. Instead, he's spending his nights playing poker at his fraternity house. During the day, Cohen studies the financial pages of the local newspaper. He watches companies like General Motors and Boeing as they rise and fall in value. And that's why he's standing outside the office for Merrill Lynch, watching the stock ticker. Earlier this morning, Cohen made some practice trades. He's pretending to buy and sell stocks, and now he waits to see whether his bets will pay off. Cohen focuses on the stock symbols coming out of the machine. When out of the corner of his eye, he notices someone approaching, clean, shave an older man in a suit. Man steps in front of Cohen, tells him to move along. He's a broker with Merrill Lynch, and the company can't have people loitering out front. The Cohen ignores a man, says he's not leaving. He's got as much right to learn about the New York stock exchanges the next guy. Cohen stares at the man, waiting for a reprimand. But to his surprise, the broker just joins Cohen at the window, asking him how old he is, and where he goes to school. And before Cohen realizes it, he and the broker are talking like friends. Cohen explains that he's gotten good at reading the ticker tape. He can predict the way the prices will go based on figures like the stock's volume, the number of shares being traded. The broker smiles as he watches the ticker tape, and then he asks Cohen what he's watching for. Cohen's got his eye on an oil company. It was trading at 27.5, but Cohen believes it's about to lose value, slip a quarter percent or even more. The broker races a eyebrow. And then together at the two stare silently at the ticker tape, watching and waiting. Soon the stock he's been waiting for tapped out of the ticker, and Cohen leaps back with a grin, $27 even. He was right, the price dropped. The broker smiles and tells Cohen that he's impressive, but if Cohen really knows how to read the direction of the market, he should come inside and invest him money. It's an exciting time to get into the market if Cohen can stomach a little risk. Cohen pauses. He knows that risk goes both ways. You could lose big, but you could also win bigger. So Cohen makes up his mind. He'll take a risk. He'll invest real money. The stock market has always seemed just like poker on a larger scale. If Cohen is as good as he thinks he is, there's no reason to be afraid of a little risk. It's 1978 in Manhattan, two years after watching that ticker tape in front of the Merrill Lynch building. In the office of a wall street trading firm, Steven Cohen hangs up a phone. He scribbles a couple figures on a yellow note pad and takes a deep breath, gazing across the bustling office. All throughout the room, stock traders are barking orders into phones, pacing around their desks. The place is a pressure cooker, but for Cohen, it doesn't get much better than this. After graduating with a degree from the Wharton Business School, Cohen made the move he knew he was destined for. He got a job trading stocks on Wall Street. An old friend was running a department at a small firm called Gruntle & Company. And while it's not the most prestigious firm in New York, Cohen doesn't mind. It's his chance to begin making a name for himself as a trader. Cohen isn't planning to wait. Today is his first day on the job, but has been given some tedious work. He's conducting trades that are both low risk and mindless. But Cohen's eager to start turning a real profit and to prove to his boss and all the other traders that he's got what it takes, Cohen just took a big risk and used company money to make a few trades on the side. Cohen glances at the clock. It's 3.50 pm, 10 minutes to the closing bell. Cohen then turns back to the quote on screen on his desk where quotes and prices dash across the screen, a river of green numbers and letters against a black background. Cohen needs the trades he made to swing in the right direction because if they do, he'll be up $12,000. But if he's wrong, he'll lose the company's money and probably his job. Cohen fidgets in his chairs the minutes tick down. As he reaches for a sip of coffee, he feels a tap on his shoulder. He turns to find his boss, Ron Azer, looming over his desk. Azer is a family friend and the reason Cohen has the job. Well right now, to look on his face is anything but friendly. Scanning the numbers on Cohen's screen, Azer snorls and he reminds Cohen that employees aren't supposed to make side trades without authorization. Cohen shrinks in his seat. He's about to offer a meek reply. But when he looks back up, he notices it's 4 o clock, trading has ended. And when Cohen glances at the figure on his screen, he becomes immediately clear. He just made $4,000 and probably stands to make another $4,000 overnight. Cohen's boss sees the numbers too and shakes his head and disbelief. It's true Cohen broke the company's rules. But Azer isn't aware of any trader having made this much money on their first day. He doesn't know whether to congratulate Cohen or smack him in the head. Cohen barely conceals a grin. And then he takes another risk asking his boss whether he can keep trading on the side. Azer pauses, then nods. For now, he says Cohen can keep it up. And if he continues to do well, soon enough, he'll be done with the mindless tasks he was first assigned. But Cohen has to produce impressive results tomorrow, the next day and every day after. Cohen says that won't be a problem. And as his boss walks away, Cohen leans back and smiles. It only took him one day, but he's beginning to realize how this company works and how Wall Street works, the only thing that matters is getting results. No one cares if you bend or even break the rules, as long as the money keeps rolling in. It's 1985 in Manhattan, several years later. Stephen Cohen is standing in front of a mirror, fixing his hair and straightening his tie. In just a few minutes, he and his boss are going to sit down for what sure to be a contentious discussion, a salary negotiation. The conversation shouldn't come as a surprise. All around them, Wall Street is booming, helped along by President Ronald Reagan's pro business policies. And Cohen himself has continued to produce large profits for the firm. With all of his success, Cohen recently received a promotion along with the responsibility of running his own trading division. Cohen is finally getting the control he's always wanted. But he also knows that a trader's value is measured by his salary. And it's about time that Cohen was properly compensated. Cohen enters the office and his boss, Ron Azer, looks up to greet him. Hey, Steve. That's a nice tie. Ralph Lauren. I wish I could tell you, my wife buys them. I just put them on. Well, isn't that how it goes with guys like us? Focused on the markets, not menswear. Anyways, come on in. You wanted to talk? Yeah, Ron. To start out, I think we have a reason to celebrate. Things have been going really well with the new division. Well, that's great news. You know, I'm proud of you, Steve. You're not even 30 years old. Already in the boss's chair. Yeah, I'm happy. That's no question. But there is one thing. The new promotion is great, but the compensation is not. Steve, you've got a more than generous package. Maybe. But I keep delivering money to the firm. I was thinking that I ought to take home 60% of profits from my division. Hazers mouth, falls open in surprise. Steve, last year you made $5 million. I want to make more. I'm sorry, 60% is unheard of. You've got a good deal. You have complete autonomy. Half a dozen traders, you can hire and fire it will. That's not enough. You know my contributions. No one else was doing mergers and IPOs before I started doing it. You know I deserve 60%. Steve, no one deserves anything. OK, fine. That's true. But I want you to think about my value. Information separates a good trade from a bad one. Now I get the information. My Rolladex covers the entire United States. I'm the best trader in this firm. And I could take my talents, my Rolladex, elsewhere. There's a long pause as Cohen's boss rubs a hand across his forehead. All right, Steve. I'll run it up the chain, OK? OK. Good. And thank you. Cohen rises and heads to the door. But Steve, I want you to pay very close attention to Rule 10B5, since you're so good at getting information. 10B5? Yeah, I've read it. Look, you may think you're some kind of rock star, but you need to be careful with your sources. I don't want this company on the wrong side of an investigation. Oh, trust me. I'm always careful. Cohen turns, walked out of the office. He meant what he said. He is always careful. And he will protect the company from any kind of federal investigation. But Cohen now runs his own division. He's done taking orders. From here on out, he's going to play by his own rules. What if your family was the victim of a home invasion, where you woke up in the morgue, or you were seriously injured miles from help? What would you do? This is actually happening. Asks our listeners this very question, while we bring you captivating real life stories of trauma and perseverance. This is actually happening, brings listeners extraordinary true stories from the people who lived them. You'll hear stories about conflict, turmoil, or threats that dramatically alter the course of someone's life. Each episode is an exploration of the human spirit, and how survivors manage to overcome hardship and move on with their lives, even thriving afterward. The new season of this is actually happening is available ad free only with Wondry Plus. And if this new season isn't enough, you can listen to more than 120 exclusive episodes available only to Wondry Plus subscribers. Join Wondry Plus on Apple Podcasts or on the Wondry app. If you're into true crime, the Generation Y podcast is essential listening. We started this podcast over 10 years ago to dissect some of the craziest and most notable murders, crimes, and conspiracy theories together. And we'd love for you to join us. Generation Y is one of the longest running true crime podcasts out there, and we are still at it, unraveling a new case every week. We break down infamous cases like the Evil Genius Bank robbery, and lesser known cases like the case of Kimberly Rico. Did she actually kill her husband after they took part in a murder mystery game? We cover every angle, breaking down theories, diving deep into forensic evidence, and interviewing those close to the case. And with over 450 episodes, there's a little something for every true crime listener. Follow the Generation Y podcast on Amazon Music, or every listen to podcasts, or you can listen ad free by joining Wondry Plus in the Wondry app. ["Wondry Plus on Apple Podcasts"] It's December 1985 in Lower Manhattan. Stephen Cohen rises from his desk and steps out into the doorway of his office, where he surveys a room full of stock traders. They're all shouting into their phones, staring nervously at screens as the day's stock prices rise and fall. For Cohen, it's a beautiful sight. This is his division. All of these traders answered directly to him. And so far, their performance has been the source of envy and incredible profits. And to bring in all these dollars, Cohen didn't turn to the Wall Street Elite, or anyone with an Ivy League pedigree. He put the word out that if you wanted to work for his division, you only had to be a winner. But winning isn't everything. Sometimes Cohen feels like giving back. With his success, Cohen has already helped out his brother, Liz and Florida, getting him hired as an accountant for the firm. But Cohen knows he can do more. So he picks up the phone and dials. Don Cohen. Hey, it's Steve. Steve, how are those Manhattan winters? Gotta tell you, it's 68 degrees and sunny here in Florida. Oh, that sounds nice, but I tell you what. I bet I can make your day even brighter. Oh, yeah, what you got? RCA, radio corporation of America. It's a buy. Really? You want to explain that? Well, look around. It's a year of mergers and acquisitions. Everyone's buying someone else out, spending off some part of their company. And I make a lot of money on it. I want you to as well. OK, but why RCA? They're conglomerate. Some technology, but what's there? Well, they're also the parent company of NBC. We're talking television, radio, right frack acquisition. And if that happens, the stock is going to go through the roof. Maybe 20 points. So I'm telling you to put in whatever you can. Oh, well, I don't know. Things are pretty tight down here. That's why I'm trying to give you a leg up. Oh, I just feel risky. Don, this is as certain as it gets. How do you know you have a source? No, it doesn't matter. I know people. I hear things. Steve, it does matter. You've got to be careful with these things, especially if you make a lot of money. Coen's size. He's always careful with his tips and timing. But he knows that other people, including his brother, have a lower tolerance for risk. All right, to ease your mind, here's what I know. The other night, I met up with a buddy from Orton. He mentioned that there might be some restructuring going on in NBC, but it was nothing specific. And there's nothing illegal about hearing someone speculate, right? I guess. All right. Well, just think about it. I thought it'd be good to pass it along. OK, well, thank you. I will think about it. Coen hangs up the phone, smiling to himself. His brother, Don, might have sounded concerned. But Coen knows him too well. Don is probably calling his broker right now, placing the orders. He'll buy the shares, and eventually he'll make a lot of money. And when that happens, he'll have no one to thank but his brother, Steve. It's late at night, six months later, and Steve and Coen can't fall asleep. He's in bed, tossing and turning. His mind racing. Finally, after what feels like an eternity, Coen gets out of bed and glances at the clock. It's 2am. And even though he doesn't want to, Coen is probably going to have to take another sleeping pill to die. Coen looks over at his wife, Patricia. She still sounds asleep, looking calm and untroubled. Coen knows that's just temporary. As soon as she wakes up, the fighting will start all over. It's been that way for a while now. Seems like their marriage is only getting more and more rocky. Normally, Coen would find peace by going into work, studying the calming rhythms of the stock market. But these days, even work is no longer a place of refuge. Back in December, Coen urged his brother to invest in RCA, the parent company of the broadcaster NBC. Coen himself had also invested in the company. And soon, their bets paid off. RCA was acquired by General Electric, and the stock price soared. Coen and his brother made a good deal of money. But the celebration didn't last long. The two were subpoenaed by the Federal Securities and Exchange Commission, which asked them to testify about insider trading. Coen knows that it could be a damaging interrogation, the kind that his old boss, Ron Azar, had warned him about, kind of threat that's keeping him up nine after night. As Coen gets up and stumbles through the darkness of the bedroom, makes his way to the bathroom and flips on the light. Coen stares at himself in the mirror, looking at his tired red eyes. He's not sure how it all came to this. He doesn't feel like he did anything wrong, but it doesn't matter what he feels. If the SEC decides he's broken the law, he could face huge fines or even time in jail. And just the threat of such a punishment has him shaken. For years, Coen has felt invincible, and his bank account has grown by millions of dollars. It seemed like nothing could stop him. But now Coen can't even sleep. And once again, he's up in the middle of the night, racked with anxiety. Coen reaches for the bottle of sleeping pills. He doesn't want to take one. Feels like admitting defeat. But if he has another sleepless night, he'll be a wreck in the morning. So closing his eyes, Coen pops a pill and swallows it down with a gulp of cold water. A minute later, Coen is back in bed, but his mind's still racing. He's worried that he could be ruined professionally, and his marriage might not survive. But soon, the sleeping pill starts to kick in and his mind grows soft and gauzy. In his stupor, Coen starts to believe that everything will be okay. The law will be fine. He'll survive the investigation. It won't be any prison time. And even he and his wife will make it through this rocket patch better than ever. A month later, Stephen Coen sits waiting in the lobby of 26 federal plaza in New York City. The building houses the offices of several federal agencies, and by now, Coen has been waiting for what feels like hours. Coen wipes his forehead as it looks around the office. He suspects that this is all part of the government's game. He's here to testify about his investments in RCA, a move that federal regulators seem to believe was a violation of insider trading laws. But apparently, the SEC lawyers want to keep him waiting, trying to rattle him before he comes in for his deposition. But Coen's going to stay strong. He can't lose this particular battle. There's too much on the line. So he waits patiently and stoically, until finally Coen sees a man with silver hair approaching. Otto Obermire as Coen's lawyer. He says the SEC is ready, and it's time to testify on the record. Coen and Obermire step into an elevator, and on the right up, Obermire reminds him of the strategy he needs to follow, be polite, be firm, and deflect every question the SEC asks. Coen nods. He knows the game plan. He'll follow it to a tee. A minute later, the elevator door opens, and Obermire leads Coen down a hallway into a conference room. Sitting behind a large table are two SEC lawyers. In front of them are large Manila folders, and when Coen takes a seat, one of the government lawyers reaches over to a tape machine and hits record. Right away, the SEC lawyers ask pointed questions. They want to know about the timing of Coen's RCA trades. They ask whether he knew about the impending takeover by General Electric, and whether he got his tips from someone inside the company. Coen exchanges a look with his lawyer, and then he issues the same response over and over when his lawyer drilled into him. Upon the advice of counsel, I respectfully decline to answer the question on the ground that I'm being compelled to be a witness against myself. Each time Coen makes that statement, the SEC lawyers seem to lose a little more steam. At just five minutes in, both government lawyers look ready to give up. It's not like Coen himself is enjoying this. He doesn't like hiding or obscuring the truth. He wishes he could tell these lawyers that his information is above board, that they should go find someone else to harass. But more than anything, Coen wants to keep himself and his brother out of jail. So he'll do what he has to do. Soon the deposition wraps up, and as Coen follows his lawyer out of the room, he feels cautiously optimistic. His attorney seems to share the sentiment. He tells Coen that he couldn't have done better. The higher ups at his firm would be proud of him for keeping us cool. The two ride the elevator back downstairs with Coen feeling buoyed by his lawyer's confidence. When as he steps out into the lobby, Coen is suddenly struck by a feeling of doubt. Maybe his lawyer is just putting up a good act, pretending to be confident. Everyone's seen the news. The SEC has been putting pressure on a lot of powerful Wall Street trainers, people like Dennis Levine and Michael Milken. The old days of bending the rules for easy money might be coming to an end. But as Coen steps out into the warm sunshine of the Manhattan streets, he lets his worry slip away. For now, he can only do one thing, continue to make brilliant trades and turn out money for his clients. Coen knows this may not be the last time he hears from the SEC. But today did offer another valuable lesson. If the government tries coming after him again, he only has to stay smart and make sure he's one step ahead. It's 1991 in a trendy Manhattan Italian restaurant and Stephen Coen takes a sip from a glass of wine and smiles at Alexandra Garcia his date for the night. Coen already likes Garcia. She's in her early 40s and she's energetic and attractive. But most importantly, she's here, sitting across the table from Coen and that seems like a minor miracle. A year ago, Coen divorced his wife Patricia. After the papers were final, Coen didn't have any interest in going on a string of unsuccessful dates. So he signed out for a dating service and the service sent out invitations to 20 different women. Coen was hopeful he'd find a match, but he only got one response from Alexandra Garcia who's sitting across the table from him now. Garcia's twirls are pasta and takes a bite. Coen smiles as he watches. So far, this date seems to be going well. But Coen worries what will happen once the conversation turns to work. For most people, finance is as boring as it gets. But even more, Coen has learned to hold his cards close ever since the SEC questioned him about insider trading. Coen managed to escape then without facing charges. But he's hesitant to talk about his job to anyone. And he hopes he can somehow make it through dinner and drinks without having to address the subject. The waiter pours another glass of wine and Garcia looks at Coen with a smile. You know what I like about you, Steve? You're really listening. This whole time I've been going on and all about myself, but I've barely talked about you, about your life. Well, my life is pretty boring, honestly. Well, I don't believe that for a second. Tell me about work, what do you do? I trade stocks. I think that's fun. But you be one of the few. No, I've seen that movie. What was it? Wall Street. Oh yeah, well, it's just like that. Not Steve, if it's not, tell me what it is like. Well, okay, what do you want to know? Well, start with the easy parts. What's the name of your company? Uh, well, I used to work at a firm called Gruntle and Company. I was there for years. But a few months back, I struck out on my own. Oh, wow, an entrepreneur. I suppose. I mean, it's a hedge fund. SAC Capital. You're going to have to forgive me, but I don't know what a hedge fund is. I'm sure most people don't. Basically, we get some investors, you know, people with lots of money. And we take some of it and put it in the stock market. But when we buy in sell stocks, we go big and we do it fast. The point is to always beat the market. But we use risky strategies. Uh, I mean, it's technical. Cohen pauses, unsure about how much to reveal. Oh, I don't know how to sandrack us. I mean, it's exciting. There's a lot of money that we get to work with. But, you know, I'm not sure we're going to be successful. Garcia sets down her wine glass and locks eyes with Cohen. Steve, you've been listening to me in paying attention. But I've also been paying attention to you. And I don't know anything about finance or stocks. But I think I see someone who's going to be successful no matter what he does. Gosh. I wish I could be as confident. Well, I am confident. You're going to be a huge success. And I look forward to seeing that happen. For a moment, Cohen stares at Garcia as he processes the implication. It sounds like she wants to stick around. And this may not be their one and only date. And maybe Garcia is right. He has always been a winner. And while it may take time, and there will be forks in the road, at some point Cohen is sure that eventually, he'll rise to the top of Wall Street. A year later, Kenny Lissack walks through a frozen yogurt shop in Manhattan. When he reaches the front of the line, he leans forward inspecting the flavors, trying to find something simple and good to make today less bad. Lissack is a trader who used to work for Gruntle on company in Stephen Cohen's division. A three years ago, Cohen asked if Lissack wanted to jump ship and help him launch a new hedge fund. Lissack's only question was how much he could invest. He hasn't had many regrets since. SAC Capital has been a wild success, producing unthinkable results for investors year after year. Lissack has also relished the chance to work alongside Cohen, trader whose genius is not up for debate. But today was a down day. One of the worst Lissack has ever seen. He and Cohen lost over $2 million, chasing a hunch they thought would pay off, but it didn't. And Lissack isn't used to losing. He wants to figure out where he and Cohen went wrong. So he grabs enough frozen yogurt for two and heads to the corner of the shop, where Stephen Cohen is waiting at a small table. Lissack takes a seat and as the two men dig in, the conversation turns inevitably to finance. Cohen begins by asking Lissack what he thinks happened today. How did everything go south so quickly? Lissack takes a spoonful and he thinks back to the events earlier. A telecommunications company reported their earnings and both Lissack and Cohen agreed it would be a good time to take a large position in the company. But almost immediately, the company's price started to plummet. Within minutes, it went from $38 to $37 and then to $35. And as the price kept dropping, Cohen shouted to buy more shares. It could be an opportunity. What at $33 a share, Lissack started feeling queasy. Still Cohen insisted they keep going. Finally, when the stock had fallen to $31, Cohen himself seemed to recognize defeat. It was then he told Lissack to cash out. All together, they took a nearly 20% hit. And that came out to about $2 million, a stunning loss that accrued over the course of just an hour. Now, sitting meekly in a frozen yogurt shop, Lissack tells Cohen what he believes really happened. They got emotional, they acted rationally, and it's as simple as that. Cohen nods, he's seen it happen time and again. Fear and ego begin to kick in and emotion drives the decisions, not reason. But Cohen tells Lissack not to worry. $2 million isn't going to shut the company down. And besides, Cohen admits that he was the one who made the call. He can live with the mistake and the consequences. But there is one more lesson to take away from today's disaster. A lot of it came down to just bad intelligence. Their edge wasn't as good as Cohen thought. Lissack nods. He knows that for traders, the word edge is just another way of saying good information. When you have edge, you have an intelligence that's unavailable to other traders. It can be the difference between making a profit of 5% or 50%, or losing $2 million an hour. Cohen crumbles up his napkin and sets it in his empty cup. He tells Lissack that things have to change. If their hedge fund is going to stay ahead of the pack, they're going to have to devote all their time, all their energy to a single pursuit, getting better edge. They need to cultivate better sources on the inside of companies. Lissack raises a eyebrow. He knows there's a fine line between getting good information and getting insider information. If you trade stocks using information that's not available to the public, you can be charged and sent to prison. That's not a risk Lissack wants to take. But when Lissack raises this concern, Cohen says he's not talking about breaking any laws. A phone call to an ex employee at AT&T isn't breaking the law, and it's not illegal to get dinner with a colleague whose brother works in microchips. It's just networking. It happens every day all across the world. And that's what gives traders their edge. Lissack and Cohen rise from the table and walk out into the early evening. Lissack has to remain cautious, but he tells Cohen that he agrees. The company does need to cultivate more sources. He's on board. But privately, Lissack can't help but worry about what will happen that legal line gets crossed when innocent research becomes insider trading. Because while Cohen might be a visionary, he's not invalible. Today proved it. And just like the stock market, what goes up often comes down. From wondering, this is episode one of the FBI versus the hedge fund from Americans Camp. In our next episode, Stephen Cohen has to dodge trouble when a large stock trade goes awry. And an FBI agent begins his inspect. There's more to the success of SAC capital than he's the eye. If you like our show, please give us a five star rating and leave a review and be sure to tell your friends. I also have two other podcasts you might like. American History Tellers and Business Movers. Follow on Apple podcasts, Amazon Music, or wherever you're listening right now. Or you can listen to new episodes early and ad free by subscribing to Wondry Plus in Apple podcasts or in the Wondrium. You'll also find some links and offers from our sponsors in the episode notes. Supporting them helps us keep offering our shows for free. Another way you can support the show is by filling out a small survey at slash survey to tell us what topics we might come next. You can also find us and me on Twitter. Follow me at Lindsay A. Graham, Lindsay with an A, Middle initially, and thank you. If you'd like to learn more about Stephen Cohen and SAC capital, we recommend the book Black Edge, Bashila Colhat Car. This episode contains reenactments and dramatized details. And while in most cases we can't know exactly what was said, all our dramatizations are based on historical research. American Scandal is hosted, edited, and executive produced by me, Lindsay Graham, for airship, audio editing by Molly Bach, sound designed by Derek Barrett, music by Lindsay Graham. This episode is written by George Docker, edited by Christina Malzberger. Our senior producer is Gabe Riven, executive producers, our Stephanie Gens, Jenny Lauer Beckman, and Marshall Lewy for Wondry. Wondry, Wondry.