American Scandal

New episodes come out every Tuesday for free, with 1-week early access for Wondery+ subscribers.

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 | Cooperating Witnesses | 4

The FBI vs. the Hedge Fund | Cooperating Witnesses | 4

Tue, 05 Apr 2022 07:01

Prosecutors race against the clock, as they prepare to go to trial. Two former SAC traders must decide whether to cooperate—or stay silent.

Listen to new episodes 1 week early and to all episodes ad free with Wondery+. Join Wondery+ for exclusives, binges, early access, and ad free listening. Available in the Wondery App

Support us by supporting our sponsors!

See Privacy Policy at and California Privacy Notice at

Listen to Episode

Copyright © © 2018 Wondery, Inc.

Read Episode Transcript

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 March 29, 2013 in New York City. It's 5 a.m. and the sun hasn't yet risen. But Wall Street trader Michael Steinberg is sitting on his couch wide awake looking out at the early morning sky. Steinberg should be asleep. He's supposed to be in Florida with his family on vacation. But that's not how things are shaking out. In a few minutes, federal agents are going to storm into his apartment. They're going to tear it apart, looking for evidence of financial crimes. And unless there's a miracle, Steinberg knows he's probably going to walk away in handcuffs facing felony charges. It's a bitter end to a long streak of pretty good years. Like many on Wall Street, Steinberg has grown to be a wealthy man. He's made his money working as a portfolio manager for the hedge fund, SAC Capital. His life was humming along, having spent years working for the hedge fund. But everything changed when he got a call from his attorney. He learned that the FBI was planning to arrest him, and soon, will be charging him with insider trading, a crime that could land him in prison. Steinberg's not alone in this. In fact, his attorney was kind enough to sit and wait with him in the early morning hours, as he waits for federal agents to knock on his door. The two have had some long and hard conversations about his legal troubles, and what this situation is really about. At this point, there's no mistaking it. The federal government is arresting Steinberg in order to send a message. They're not so much interested in him. Prosecutors are really going after Steve and Cohen, the founder of SAC, and Steinberg's boss. It doesn't matter that the legendary investor recently settled with the Securities and Exchange Commission, paying more than $600 million to set aside charges of insider trading. Because that agreement had a hitch, it didn't prevent the government from going after individuals working at SAC. It only protected the company. And it's obvious the government is still out for blood. And that's why they're going to take down Steinberg for a relatively minor offense. They're signaling to Cohen that he's still in their crosshairs, and that the FBI may be coming for him next. Steinberg looks at his watch. It's now 6 a.m., and suddenly, as he expected, he hears a group of footsteps approaching his apartment. There's a banging on his front door. Steinberg nods it as a turn. It's time. Steinberg opens the front door, where he finds a group of federal agents in dark blue jackets. Ah, Michael Steinberg, we're from the FBI. We have a warrant to search your apartment. Okay, come in. The agent looks at the couch, and who's that? That's my lawyer. He's just here for support. All right, there have you armed? Armed? Are you serious? Answer the question. No, I work on Wall Street. You sure you got the right guy? The agent signals to his colleagues. All right, let's do this fast. The FBI agent storm into the apartment and quickly begin tearing it up, looking for evidence. Steinberg watches in horror as one agent knocks aside an expensive vase. Hey, can you guys just... Could you be careful? You know, some of those ranteeks. You worried about a vase, Steinberg? How much did you pull in last year? Two million? Five? Well, it doesn't matter what I make. I was just doing my job. And that's what we're doing. Guys, sweep the bedroom. I don't have anything stashed there. And I'm supposed to believe you. No. Go ahead, give me your hands. Why do you want my hands? Let me see your hands. Fine, I just... But before Steinberg can say another word, the FBI agent puts him in handcuffs. The agent tightens them out. To add digs into Steinberg's wrists. Steinberg winces in pain. But the FBI agent only smiles as he leads him away. As the two ride the elevator down into the lobby, Steinberg feels weak and dejected. The federal agent seemed to be enjoying this little exercise. They probably see him as the enemy, a rich guy who makes the world a worse place. But Steinberg knows that's not right. Maybe he got a bit of inside information. Maybe he made a mistake. But in the grand scheme of things, he's not as serious criminal. He's just making a dollar. A minute later, the agent shoved Steinberg into the back of a grey Ford. And as he looks out the window, Steinberg spots a reporter from the Wall Street Journal who's recording the whole event. Steinberg moans as he dips his head. If he had any doubts before, now he's completely certain. This is an orchestrated event intended to drum up media coverage. The government doesn't actually care about Steinberg. This is about Stephen Cohen. He's sending a message, and the FBI is ready to take him down. 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? When we agree on that, too, Sachi Art. They have art works from thousands of emerging artists around the globe, and they have a lot of art 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, Satin, 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. This creates 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 8 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 proven winners color choice dot com slash wundry. That's proven winners color choice dot com slash wundry. From wundry, I'm Lindsey Graham and this is American Scan. By 2013, the federal government had claimed a number of victories in its investigation into hedge funds and insider trading. Dozens on Wall Street had been convicted of crimes or pleaded guilty. And federal agents began to close in on their prime target, the $14 billion hedge fund SAC capital. Two employees from SAC, Michael Steinberg and Matthew Martoma, had been arrested and prosecutors had high hopes they would turn on their former boss, Stephen Cohen. But first, officials would have to get the traders to flip. And even once they had their case lined up, prosecutors would then have to take on Cohen himself, a fight that would end in either triumphant victory or a crushing defeat. This is episode four, cooperating witnesses. It's April 2013 in Manhattan. In the building housing the US Attorney's Office, Arlo Devlin Brown makes his way through a busy lobby. He passes through security and when he reaches an elevator, he stops noticing his own reflection in the mirror. Devlin Brown has a shaved head and a short salt and pepper beard. He's been a federal prosecutor for the last eight years and the work has been fulfilling. Devlin Brown feels confident that he's on the right side of the courtroom, the side pursuing justice, and not just a big paycheck. Though as he gazes at the bags under his eyes in the mirror, he knows the job can be all consuming. That's been the case with Stephen Cohen and SIC Capital. Devlin Brown is one of the lead prosecutors investigating the hedge fund, and he's put in endlessly long days building the case. He believes he now has enough momentum to move forward with criminal charges. But first, he has to convince his boss that charging Cohen is the right strategy. Devlin Brown has to prove that they have a strong enough case to win if they go to trial. A few minutes later, Devlin Brown approaches a large office with a wide view of the East River. His boss, Preet Bharara, looks up from his desk and motions for him to grab a seat. As he waits, Devlin Brown takes a good look at his boss. Bharara is a charismatic prosecutor with a biting sense of humor. As the US attorney for New York's Southern District, he's one of the most powerful figures inside the Department of Justice. And Bharara doesn't like to lose. If Devlin Brown is going to push forward with charges against Stephen Cohen, he'll need an airtight case. A moment later, Bharara looks up and announces he's been going over the detailed memo that Devlin Brown helped prepare. It outlines all the evidence the government has amassed against Stephen Cohen. And having read the report, Bharara is curious what Devlin Brown thinks is their single best piece of evidence. For Devlin Brown, it's an easy answer. In 2008, SAC Capital Portfolio Manager Michael Steinberg got early access to some inside information. It revealed quarterly earnings at the computer company Dell, and Steinberg executed trades using that information. He ended up making over a million dollars. But Steinberg also emailed his boss, Stephen Cohen, gave him the information about Dell too. Soon, Cohen executed his own trades. He sold off 500,000 shares of the company, and saved himself a loss of $1.5 million. Devlin Brown reminds Bharara that this is insider trading as Clear's Day, and it's just like what happened before, with Cohen's trader Matthew Martoma, who got inside information about an Alzheimer's drug. In both cases, Cohen was handed the information and executed lucrative trades. There's not a lot of room for interpretation. Bharara nods and says the reasoning is clear, but there's an issue. Despite all the evidence, they don't have anything directly incriminating Cohen for insider trading. Without smoking gun evidence, Bharara doesn't have interest in pursuing a big, expensive case, when they may not win. Devlin Brown begins to push back, but Bharara interrupts him, reminding the prosecutor that they need something more, like a wiretap or a witness. Devlin Brown smiles, saying he's got good news. Michael Steinberg and Matthew Martoma are both now facing legal peril. They're bound to cooperate and turn on their all boss. Bharara says it's good in theory, but so far both men are keeping their mouths shut. And while Cohen is obviously running a crooked operation, the US attorney's office can't go after him, not until they have something stronger. Devlin Brown nods and rises from his chair. He's frustrated that they're moving so cautiously, but that's just how it goes sometimes. And the case is far from over. Later this month, Devlin Brown and his colleagues are going to sit down with Cohen's attorneys. They'll review the case, and Devlin Brown hopes the meeting will show some of their weaknesses. He's not exactly sure what he'll find, but if it goes well, he may be able to convince his boss that it's finally time to take off the gloves and charge Stephen Cohen with federal crimes. Two weeks later, Arlo Devlin Brown steps into a conference room on the eighth floor of a federal building. It's packed, walled wall with people and dark suits, government lawyers, federal officials, even several FBI agents. Across the table from all of them is another group of lawyers, but with one look at their expensive suits, Devlin Brown immediately knows which side they represent. They're Stephen Cohen's lawyers, and they're here to discuss the government's case against their client. Devlin Brown leans against a wall, taking stock of the situation. He has no illusion about the fight ahead. Cohen's legal team charges $10,000 an hour and for a good reason. There's some of the top attorneys in the country, and they're not about to let their clients suffer an easy loss. But Devlin Brown is a good federal prosecutor, and he knows that these fights are rarely a quick win. So if he wants to move ahead and prosecute Cohen, he's going to have to identify the opposing side's weaknesses, and find a way to exploit them. Cohen's attorney, Martin Klotz, finishes with a series of long opening remarks. When the gray hair attorney sits back, Devlin Brown decides it's time to pounce. Mr. Klotz, let's back up a bit. I'd like to review the email about Dell Computer, so one that somehow ended up in Stephen Cohen's inbox. Well, to start with, there was nothing jeopardizing about that email. I disagree. One of Stephen Cohen's traders forwarded material non public information. Do we agree on that? That might have been the nature of the email. So Stephen Cohen was in possession of inside information. That information was sitting in his inbox. But what? What do you imply? Well, there's not a single witness who would testify to Cohen discuss the email with his traders. But even without a witness, it's more than enough to see the Cohen had the email and then executed a trade using the information. Klotz leans back with a smile. Well, let me ask you something, Mr. Devlin Brown. You have email? I do. You get a lot of messages? I do. And I'm just going to assume that you don't read every single one of them, right? But let me tell you about Stephen Cohen. He runs a $14 billion hedge fund. He gets 1,000 emails every day. He reads maybe 10% of them. Klotz opens a large binder and points to a screen shot of Cohen's inbox. Even with a spam filter, his inbox gets hammered. At least 20,000 emails a month. Look at that volume. And tell me with a straight face that you can prove he read one out of 20,000 emails. Mr. Klotz, there's a clear sequence. Cohen gets an email with inside information. And soon, he sells off all of his shares. Now, let's be clear, that's circumstantial. And this information about Dell, travels through six people before it reaches my clients inbox. And what's the point of that? My client was too far away from the source. He was ignorant of the origins of the information. It's not a legitimate example of insider trading. The information in that email was both material and nonpublic. That is the very definition of insider trading. When my client doesn't remember reading it. And if you approve otherwise, I'd like to see it. For a moment, Devlin Brown stares at Cohen's attorney, incredulous. Anyone with a hint of common sense can see that this was a clear cut example of insider trading. But Devlin Brown also knows that, to win a case, you need more than just common sense. You need evidence. And as Cohen's highly paid attorney just revealed, the government still doesn't have a smoking gun. Soon the meeting breaks up, and Devlin Brown exits the conference room. He's frustrated. He wants to go after Stephen Cohen. But the case can't move forward as is. The government needs a new strategy. But the good news is, Devlin Brown might actually have one. The government does have a case against Stephen Cohen's former trader, Matthew Martoma. Martoma could face real prison time for trading on inside information about an Alzheimer's drug. The former trader also has a wife and children. He should be desperate to avoid prison. And that makes him vulnerable. Devlin Brown will have to lead a withering prosecution of Martoma. And with fear as a motivation, Martoma might finally be willing to flip. There's no guarantee the strategy will work. But it might be the government's last option. And the only way they'll be able to put Stephen Cohen on trial. It's late May 2013 and Stanford, Connecticut. Inside the offices of SAC Capitol, Stephen Cohen is trying to focus on work. He needs to clear his mind and get a read on the markets before he makes some big decisions. But Cohen can't concentrate. He keeps glancing away from the computer and staring at a government document on the edge of his desk. It's a subpoena from the US Attorney's Office. And while it's not a criminal charge, it's a loud warning shot. The Justice Department is demanding that Cohen testify about inside or trading in front of a grand jury. Cohen knows he can dodge the most difficult questions. He's not worried about the legal exposure. But there is a very serious problem he now has to deal with. Someone told the press about Cohen's subpoena. And once again, Cohen and his company, being dragged through the mud. It's an issue with some real consequences. Cohen's investors have now begun to panic. They've pulled out nearly $2 billion from the hedge fund. That won't destroy SAC Capitol. But Cohen knows it could be the beginning of a very dangerous spiral downward, with more and more investors pulling out their money. The whole thing makes Cohen furious. He thought he'd made his problems go away after paying some $600 million to the SEC. But now another federal agency is buying antitheles, and continuing the government's endless war against SAC Capitol. Cohen's mind is racing when his phone rings. He takes a look at the caller ID. Someone from Blackstone Group, an investment company, an SAC Capitol's largest client. Cohen answers the phone, and he's greeted by one of Blackstone's executives. After some initial pleasantries, the executive announces that he has some unfortunate news. Blackstone is changing its position. The firm needs to redeem the money they've invested in SAC Capitol. Cohen is speechless. The executive can't possibly be talking about pulling out everything. So Cohen asks, how large of a redemption are they talking about? The executive says, and said they'll need to pull out most of their $550 million investment. Cohen blanches. This is exactly the downward spiral he's been most afraid of. Investors growing panic. The fear spreading from one client to the next. He has to stop this cycle. So keeping his voice calm. Cohen asks if this decision has anything to do with his subpoena to speak in front of a grand jury. Because Cohen can offer an assurance, it won't be a problem for any investor. The Blackstone executive says the subpoena is part of it. But more than anything, his company board doesn't want their capital tied up in a firm that's battling the department of justice. Cohen argues back, telling the executive that it's all just grandstanding. The Justice Department is trying to seem tough on Wall Street. Their case is flimsy though. And SAC Capitol isn't going to walk away with any real damage. The line goes quiet for a moment. And the executive says he'd like to believe Cohen. But no matter what he says, there could be criminal charges. And if SAC Capitol goes bankrupt, it would be a disaster. Blackstone has to answer to its own clients. And they can't take on that kind of risk. The company has no choice but to significantly pull out. Cohen sits quietly for a moment, trying to absorb the information. And it's then he realizes he's not going to win this fight. So he swallows his pride and tells the executive that he's sorry to hear they've had a change of heart. If Blackstone would ever like to reinvest, SAC Capitol will always be here. The executive thanks Cohen for all the good work. And then he says goodbye. Cohen hangs up the phone, his whole body numb. He can't remember the last time he was this stunned. Shocked so deeply, it seems like his entire world is about to fall apart. Cohen knows that Blackstone is only one investor. And he still has billions of dollars of his own money that he can use as a safety net. Still, Cohen can't help but wonder if this is a turning point. If all the victories, all the years of his wild success, the fame, billions of dollars, if all of it is now on the verge of a sudden collapse. What if your family was the victim of a home invasion? Or you woke up in the morgue? Or you were seriously injured miles from help? What would you do? This is actually happening. Ask 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. It's July 25th, 2013 in Manhattan. Preat Barrara steps onto a podium in the atrium of the US Attorney's Office. The space is bustling. Out in the audience, there's a gaggle of photographers, reporters, and television crews. They are finding their seats and getting their microphone set up, all getting ready for what's sure to be an explosive press conference. In just a few minutes, Barrara is going to deliver a series of prepared remarks. As the US Attorney for the Southern District of New York, he's going to announce criminal indictments against the hedge fund SAC Capitol. It's been a long and exhausting investigation. And it hasn't turned out the way Barrara wanted it to. Federal prosecutors are not going to charge Stephen Cohen himself. That choice came down to evidence. The government simply doesn't have enough direct proof to persuade a jury that Cohen is guilty. And Barrara is not going to prosecute anyone who stands a good chance of getting off a trial. But Barrara also knows the US Attorney's Office can still do plenty of damage. The press is always hungry to go after someone who looks like a villain. And by announcing charges against SAC Capitol, Barrara can make Cohen the face of dirty Wall Street. It'll damage his reputation and potentially cause more investors to flee Cohen's company. So after the press has time to set up and settle down, Barrara leans into the microphone. He outlines the charges he's now bringing against Cohen's hedge fund. They include insider trading, wire fraud, and money laundering. Barrara goes on to describe a culture of corruption that's pervasive at SAC Capitol. It's been fostered over the course of years and involves investments in a range for companies and industries. The illegal profits Barrara adds amount to at least hundreds of millions of dollars. As alleged, SAC trafficked and inside information on a scale without any known precedent in the history of hedge funds. As described in the indictment, the scope of illegal trading was deep and it was wide. Soon Barrara concludes his prepared remarks and begins taking questions from reporters. One woman shouts out asking if the U.S. attorney's office plans to criminally indict Stephen Cohen himself. Barrara squins with a look at frustration. He knew this question was coming and he's not happy with the answer. But he tells the reporter that today they are only announcing charges against SAC the company. Still he adds, I'm not going to say what tomorrow may or may not bring. Another reporter fires off the same question, asking again whether the Department of Justice is going to bring charges against Stephen Cohen. Barrara repeats the answer, but again he drops a hint, telling the reporter you'll have to wait and see. Barrara looks out at the sea of TV crews and flashing cameras. He knows the press might be critical of the announcement and it's true that today justice hasn't been fully served. Cohen deserves criminal charges. But Barrara wasn't lying while he's not currently announcing charges against Cohen. Sometimes soon that could change. Two former SAC employees could still flip and testify against their old boss. If and when they do, Barrara may return to this podium to announce new charges against Stephen Cohen. About two months later, Prit Barrara is sitting in his office when there's a knock on the door. He turns to find a man with dark framed glasses and a tight turbine. Anjansani is one of Barrara's top deputies. Barrara called him in today because it's time to make a big decision about SAC capital. The months have dragged on ever since Barrara unveiled criminal charges against Stephen Cohen's hedge fund. But in that time nothing has really changed. Despite all the bad press and the threat of criminal liability, Cohen's firm is still making money off the stock market every single day. Barrara knows this case has generated good publicity for the U.S. Attorney's Office. And Barrara himself has been publicly lauded as the man cracking down on Wall Street. But a good story in the press isn't good enough. The Justice Department needs to take action against SAC capital. And the only question is what move they should make. Sani takes a seat in a leather armchair. Alright boss, what's the plan? Well Anjans, let me start by telling you what we're not going to do. Okay, we're not going to sit around and play the waiting game anymore. It's not working. Here, look at this. This is today's newspaper. The president of Goldman Sachs is still calling Cohen an important client. Morgan Stanley, JP Morgan Chase. Now know the big firms have batted an eye since the indictment. Well, is that any surprise? Place it like Goldman? They only care about one thing. The money they make from SAC. Well they start caring if Cohen went to prison. And all his money was frozen. And we're not in a position to do that, are we? No, we're not. Barrara shakes his head as he looks off in the distance. We still don't have the evidence. And his old traders, Martoma and Steinberg. All they have to do is cooperate. They'd save themselves jail time. But they're both staying silent. Yeah, well, it goes that way sometimes. So what? We try our luck and actually take Cohen to try it? No, no, no. We are done waiting, but we're not going to risk losing a trial. I don't think we necessarily lose. But it's a possibility, a real one. And if it happened, you and I, all of us, our careers have done. So I shoot his boss at a spawning look. Well, what? What's plan B? Let's force Cohen to admit that SAC did something wrong. We have an indictment against the firm. And we've already seen that Cohen is willing to pay up if it makes the problems go away. So I think it's time to offer some terms to see if they'll settle. A settlement? No, it was going to light that on our side. No, no one likes it. I sure don't. But it makes sense for us. And it makes sense for Cohen. Let's just start thinking about numbers. I think we should go big. I mean, he paid the SEC 600 million. Let's double that. You really think Cohen is going to agree to a $1.2 billion fine? Well, if it saves him from trial, yeah, he will. Okay. Look, I want to force SEC capital to shut its doors. That's nonnegotiable. Well, I don't think Cohen's going to agree to that. Cohen would be resistant. No doubt. But I promise you, he'll help cave. It would be his best move. So let's get some paperwork going. Get the terms and writing. And we'll give Cohen's legal team a call. I'm sure they're expecting us. As Saunee leaves the office, Bharara turns and looks out the window. He has a sweeping view of this federal building, a place where people are committed to rules and enforcing the law. It grades Bharara that he's been forced into this position. Stephen Cohen should be going to prison. But there is still one final hope. The Department of Justice has active cases against Cohen's former traders. And while the traders haven't yet agreed to cooperate, they might still change their minds. Three months later, prosecutor Arlo Devlin Brown, sits down at his desk with a strong cup of coffee. He takes a big gulp and rubs his tired eyes. And he dives back into a mountain of documents, as he continues preparing for what's bound to be one of the most important legal cases of his life. In a few weeks, Devlin Brown is going to trial against the former SAC capital trader, Matthew Marton. It's been a long and grueling preparation. And Devlin Brown has mostly been living at his office. His family is not happy about it, but there are just too many details to get an order. The visual exhibits, the depositions, the witness lists. And the prosecution has a strong case, largely thanks to Dr. Sid Gilman, one of their witnesses. The researcher and Alzheimer's expert agreed to cooperate and reveal how he fed inside information about a drug trial to Matthew Marton. The doctor's testimony should make getting a conviction, a slam dunk. But Devlin Brown doesn't really want a conviction. He's still praying that the strength of their case will finally convince Matthew Marton to start talking and incriminate his former boss, Stephen Cohen. It's not that Cohen's own legal situation is exactly easy. SAC's founder recently agreed to a $1.2 billion settlement with the Justice Department, admitting that SAC capital was guilty of several counts of insider trading. It was a huge PR victory for the government. But once again, Cohen managed to avoid any criminal prosecution himself. The settlement doesn't necessarily preclude a future prosecution of Cohen. But as things stand, the government does not have a case against him. Devlin Brown reaches for another sip of coffee, when suddenly his phone rings. He grabs the receiver and when he answers, he hears the familiar voice of Matthew Marton's lawyer. The lawyer cuts to the chase and says he wants to make an offer. One Devlin Brown should seriously consider. Hearing those words, Devlin Brown sits up an excitement. This could be the moment he's been waiting for. Maybe Marton is finally ready to talk, to turn against Cohen and serve as a cooperating lawyer. But as Marton's lawyer lays out the details, Devlin Brown's heart sinks. The lawyer wants to know if the prosecution would accept a guilty plea from Marton, along with an agreement to cap his prison sentence at five years. Devlin Brown shakes his head. This isn't what he was hoping to hear. And the US Attorney's Office has no interest in that kind of deal. So Devlin Brown decides to press one last time for a different deal, with Marton serving as a government witness. Devlin Brown reminds Marton's lawyer that with a trial just around the corner, Marton could save himself and his family, weeks of sorrow and stress. All he has to do is cooperate. Marton would need to describe a conversation from 2008, in which he spoke with Cohen and fed him inside information about the Alzheimer's drug. Information that Cohen then used to make stock trades. If Marton would speak openly with prosecutors, a reduced sentence would be absolutely on the table. But Marton's attorney says it's not happening. Marton has nothing to say about his former employer, especially since Marton has a good chance of winning in court. This cocky assertion is unbelievable. Devlin Brown knows the government has an airtight case. Marton is going to land in prison, cooperating is his one last shot at freedom. But the lawyer remains firm and says it's not going to happen. There will be no deal for cooperation. Devlin Brown's size, and says if that's the case, the two sides will just have to have it out in court. Devlin Brown hangs up and takes his sip of coffee. It's cold and as bitter as Devlin Brown feels. It just doesn't make sense. Why is Marton so loyal, so unwilling to save himself? Cohen's old employee must know something no one else does, but whatever the reason, one thing is clear. They're going to trial, and Marton was loyalty. It's going to cost him his freedom. It's February 6, 2014. Arlo Devlin Brown makes his way out of a federal courthouse in Manhattan and steps out into cold winter air. As he heads down the steps, he takes one last look at the building with his grey brick facade and tall Greek columns. Devlin Brown is ready to get out of there and ready to get a drink. Because for the last few weeks, he spent some long days at this courthouse, leading the trial of Matthew Martoma. It was a hard and bitter fight. But earlier this afternoon, after three days of deliberation, the jurors announced their verdict. The former trader from SAC Capital was guilty on two counts of securities from the court. One counts of securities fraud and one count of conspiracy to commit securities fraud. Martoma will almost certainly find himself in prison for a long time. Now, as Devlin Brown walks towards a town car, he takes a deep breath. He and his co prosecutor, Eugene and Goliath, are supposed to go out for a little celebration. They've put in years of work, and the verdict came back in their favor. But even after their winning court, Devlin Brown still can't let go of a question. One that's been driving him mad since even the first day of trial. Devlin Brown climbs into the town car and takes a seat next to his co prosecutor. You know, I still don't get it. Martoma's a young man. He's gonna wife three children. He could have saved himself. Why didn't he just cooperate? Oh, man, Arla, we'll never know. But don't beat yourself up. We won. Good guys won. I don't think I'd call it a win. What are you talking about? And what universe is a guilty verdict? Not a win. It's not a win when the real criminal is still out there. Stephen Cohen is still training billions in the stock market. Martoma is just small fries, man. He always was. I just can't let it go. Why did he not turn on Cohen? Well, I say see, was paying Martoma's legal fees. That's not why he didn't fold? Because he had a free lawyer? No. The best defense in the world couldn't have saved Martoma. Maybe he's a man of principle. I don't know. You didn't want to be a rat. No. Because Wall Street is known for a strong code of ethics. No. No, it's something else. Arla, look, I don't know. This isn't philosophy class. You don't have to go searching for the truth. Your job was to win. And that's what we did. And by the way, with a win like this, I bet you start getting some phone calls from private firms. Oh, you think I have any interest? Any at all working for the other side? I don't know. Seven figures are pretty hard to beat. Take a look at your life. You've worked every holiday. You've missed time with your family. It's called sacrifice. Well, people expect something when they make a sacrifice, right? And Stephen Cohen, he's still out there, a free man. Our office didn't have the courage to bring him down. So you tell me, was the sacrifice worth it? Are the good guys really so good? Devlin Brown shakes his head and looks out at snowy streets. Oh, I can't believe you. It's always worth it. Let me tell you something. You hear anyone asking about the private sector? You tell them I am not interested. We're gonna get them. We'll get them next time. Soon, the town car pulls up in front of the midtown bar and the two prosecutors climb out into the cold. Devlin Brown can already see some of his colleagues inside the bar. They're raising their glasses, celebrating a win in court. He knows this may not have been a perfect victory. They should have found a way to go after Stephen Cohen to hold him accountable. But Devlin Brown will just have to move on and try again. Because there's always another case. Always. More crimes on Wall Street. It's November 6, 2020, six years later. Stephen Cohen takes a seat on a wide leather couch at his sprawling home in Greenwich, Connecticut. He whips out his cell phone, loading a website for the sports news network ESPN. Cohen scrolls eager to see if they've reported the big announcement, something he's dreamed of since he was a kid. A fantasy that was out of reach years ago. But today his life is far different, and his dreams seem to be coming true. Of course, it hasn't always been that way. In a settlement with the government, Cohen was forced to close up SAC capital. It was a hedge fund he started when he was just in his mid 30s. He paid over a billion dollars in fines and has reputation dragged through the dirt. But the pain turned out not to last long. He quickly made back the money he paid to the government in fines. And even though he had to close SAC, Cohen was able to start a new private investment firm called 0.72 asset management. And already, the firm is doing well. Cohen is in a good place. There was nothing better than walking away from government charges and remaining one of the richest men in the world. Nothing felt so good in liberating until now. Sitting in his living room, Cohen refreshes ESPN's website. He scrolls again eagerly through his phone, desperate to find any news about the big announcement. And for a moment, he worries that maybe something went wrong. Maybe his press release didn't go out in time, or that it was sent to the wrong reporters. But then Cohen spots the headline he's been looking for. Steve Cohen completes 2.4 billion dollar purchase of New York Mets. Cohen skims the article. It highlights the most important parts of the deal. Cohen is now the chief executive officer of the Mets, the baseball team from Queens, New York. He owns 95% of the franchise, meaning he's in complete control. The purchase wasn't cheap. 2.4 billion dollars is nothing to sneeze at. But Cohen could afford it. And he wasn't going to suffer another stinging loss like he did years ago, when he tried and failed to buy the Dodgers. Then Cohen leaves ESPN's website, and begins sifting through the internet looking for reactions. Soon his eyes light up. Public approval is through the roof. Cohen is planning to spend real money to make the Mets a competitive team. And the fans rightfully see this as the beginning of a new era for their baseball team. Cohen is tempted to see this as a new era for himself, too. He's never been the majority owner of a professional baseball team. And with SAC Capital in the rear view mirror, he's moved on to the next phase of his career. In many ways for Cohen, it's the same as it always was. He's playing the odds, taking risks, making big bets with a lot of money on the line. But Cohen learned a lesson years ago. With big risks, there's always going to be the potential for a major loss. But Cohen isn't worried about that. He's always been able to read the competition, play life like a game of poker. So far, he's had a long winning streak. And that doesn't look like it's going to end anytime soon. After a sprawling investigation, the U.S. Attorney's Office has secured convictions for over 80 people in cases involving insider trading. Those found guilty include Matthew Martoma, the former portfolio manager from SAC Capital. Martoma was sentenced to nine years in prison. Two years after successfully convicting him, Federal prosecutor Arlo Devlin Brown took a job in the private sector. He now defends clients under investigation for financial crimes. FBI agent BJ Kang began working in the Bureau's Washington Office, investigating cyber crimes. In 2021, he brought down a Russian insider trading ring that made $82 million from stolen earnings reports. But despite years of federal enforcement, insider trading remains a widespread problem on Wall Street. The Securities and Exchange Commission prosecutes about 50 cases of insider trading every year. But according to a recent study, those cases represent only the tip of the iceberg. And while some argue that insider trading is a victimless crime, researchers say that the evidence proves otherwise. Scholars argue that insider trading distorts the markets. Investors may hold back their money, believing there's no way to compete with those trading on inside information. It's a problem, according to these researchers, that can harm the economy as a whole. Part of the issue lies in the tangled web of federal laws used to prosecute insider trading. Many have argued that it's time to reform these laws, as a way to crack down on financial crime. In May of 2021, members of Congress tried to do just that. The U.S. House of Representatives passed the Insider Trading Prohibition Act. This bill would rewrite federal law, aiming to make it easier to prosecute insider trading. But while the bill passed the House, as of early 2022, it is still a waiting action in the Senate. From wondering, this is episode four of the FBI versus the hedge fund from American scam. In our next episode, I sit down with Dave Levinton, deputy Washington Bureau Chief for the publication Insider. We'll discuss his recent investigation, which found that members of Congress have been routinely breaking a law intended to protect against insider trading. 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 add free by subscribing to Wondery 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 this show is by filling out a small survey at slash survey to tell us what topics we might cover 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 by Sheila Cole Hotcar. This episode contains reenactments and traumatized details. And while in most cases we can't know exactly what was said, all of our dramatizations are based on historical research. American Scandalist hosted, edited, and executed produced by me Lindsay Graham for airship, audio editing by Molly Bach, sound design by Derek Barons, music by Lindsay Graham. This episode is written by George Docker, edited by Christina Malzberg. Our senior producer is Gabe Riven, executive producers of our Stephanie Gens, Jenny Lauer Beckman, and Marshall Louis for Wonderland.