OFTEN the drama of a prosecution concludes with a legal settlement. In the case of Steven Cohen and his $15-billion hedge fund, SAC Capital, it may only mark another chapter of the legal troubles.
On March 15th, SAC settled civil charges for insider trading with the Securities and Exchange Commission (SEC), agreeing to pay a fine of nearly $616m. The amount was by far and away a record, but easily affordable for Mr Cohen. In retrospect, the day of the settlement even stands out as a particularly happy one: it appeared that long-running legal issues had finally been put to rest.
But on March 29th, Michael Steinberg, a senior portfolio manager at an affiliated fund, Sigma Capital Management, was arrested in his New York home.  Both the SEC and America’s Department of Justice accuse him of insider trading and securities fraud (he denies any wrongdoing). And the day before, a federal judge held up approval of the $616m settlement—because of a clause that has become increasingly controversial: the defendant neither confirms nor denies guilt.
At the core of the SAC saga is the question how a player in a highly competitive industry can be so extraordinarily successful without a structural explanation. The settlement and subsequent charges are about employees of SAC and its affiliates receiving advance information about the earnings of technology companies and the fact that a promising Alzheimer’s treatment would fail.
It is hard to avoid asking whether these incidents make SAC or its leader guilty. Mr Cohen has not been charged with any crime. Mathew Martoma, the analyst involved in the Alzheimer’s-related charges, has pleaded innocent and has so far shown every intention of fighting charges. John Horvath, an employee of another fund affiliated with SAC has pleaded guilty of receiving illicit tips about the earnings of technology companies.
Mr Horvath is alleged to have passed on this information to Mr Steinberg, but whether Mr Steinberg had any knowledge of the information’s provenance will need to be proven in court. It will also have to be proven that the chain of illicit conduct went further, to the top of SAC—even if the parent hedge fund did benefit from the resulting trades.
The difficulty of proving these links no doubt explains why the SEC opted to settle. As for SAC, it may have felt that the fine, its size notwithstanding, was a cheap way to avoid a more serious conviction. The firm also may have preferred to avoid a lengthy legal fight because of the impact this would have on its business.
At any rate, the settlement seems to have been reason for Mr Cohen to celebrate. He has since bought a painting of Pablo Picasso’s mistress (for $155m, pictured) and an oceanfront property in East Hampton on Long Island (for $60m). If the purchases were indeed a way to mark closure, they now appear premature.

the economist.com