Black Edge Review: The Dark Side of Wall Street

“Black Edge: Inside Information, Dirty Money, and the Quest to Bring Down the Most Wanted Man on Wall Street” is an enthralling deep dive into the world of high-stakes finance, insider trading, and the relentless pursuit of wealth. Written by Sheelah Kolhatkar, this book offers a detailed account of the rise and fall of Steve Cohen and his hedge fund, SAC Capital.

The Intricacies of Black Edge

The term “Black Edge” refers to the most coveted and illegal, type of information on Wall Street: insider information. The book delves into how this information is obtained, traded, and used to amass fortunes while skirting the boundaries of legality.

Key Characters in Black Edge

Steve Cohen: The Enigmatic Billionaire

At the heart of the story is Steve Cohen, a brilliant trader known for his uncanny ability to predict market movements. However, Cohen’s success wasn’t solely due to his trading prowess. His obsessive nature and relentless drive to be the best often led him to push the limits of legality.

Cohen’s controlling demeanor and insatiable appetite for success made him a formidable figure on Wall Street. His ability to maintain a distance from the actual act of insider trading while potentially benefiting from it makes his character both intriguing and controversial.

The Investigators: Pursuing Justice

The book also introduces readers to the investigators and prosecutors determined to bring Cohen and SAC Capital to justice. Their relentless pursuit showcases the challenges of proving insider trading and the lengths to which they went to uncover the truth.

Cohen’s Obsessive Control

In part, Steve Cohen’s success was due to his obsessive control over every aspect of his business. He was known to monitor traders’ communications, expect instant responses, and maintain an environment of intense pressure. This obsession with control and perfection, combined with his vast resources, made him a formidable opponent for regulators.

A Glimpse into SAC’s Insider Trading: The Elan and Wyeth Case

One of the most notable examples of alleged insider trading involving SAC Capital, as detailed in “Black Edge,” revolves around the pharmaceutical companies Elan and Wyeth.

The Valuable Tip

In 2008, Elan and Wyeth were jointly developing an Alzheimer’s drug called bapineuzumab. The results of the drug’s clinical trials were highly anticipated by the market, as they would significantly influence the stock prices of both companies.

Mathew Martoma, a portfolio manager at SAC, managed to establish a connection with Dr. Sidney Gilman, a neurologist involved in the drug’s clinical trials. Through this relationship, Martoma allegedly gained access to confidential information about the trial results before they were made public.

The Trade

Armed with this inside information, SAC Capital took massive short positions on Elan and Wyeth stocks. When the drug’s trial results, which were less favorable than anticipated, were publicly announced, the stock prices of both companies plummeted. Having bet against the stocks, SAC Capital made profits estimated at around $276 million.

The Aftermath

The trades did not go unnoticed. The suspicious timing and scale of SAC’s trades caught the attention of regulators. Dr. Gilman’s involvement was uncovered, and he eventually cooperated with the authorities, becoming a key witness against Martoma. Mathew Martoma was later found guilty of insider trading and sentenced to prison.

This Elan and Wyeth case is a prime example of the lengths traders might go to gain an edge in the market. It also underscores regulators’ challenges in detecting and proving insider trading, especially when dealing with sophisticated entities like SAC Capital.

Where is Steve Cohen Now?

After the legal battles and the dissolution of SAC Capital, Steve Cohen faced a two-year ban from managing outside money. However, he made a comeback with the launch of Point72 Asset Management, a family office that later transitioned back into a hedge fund. Today, Cohen remains a significant figure in finance, continuing to manage billions and maintain his reputation as one of Wall Street’s most influential traders.

Final Thoughts on the Black Edge Review

“Black Edge” is a must-read for anyone intrigued by the world of finance, ethics, and the gray areas of legality. Kolhatkar’s meticulous research and compelling narrative style make it a gripping tale of ambition, power, and the quest for justice.

This book serves as a stark reminder of the lengths individuals might go to in the pursuit of wealth and the challenges regulators face in ensuring a level playing field in the world of high-stakes finance.