Black Edge by Sheelah Kolhatkar is a riveting true-life legal thriller that takes readers inside the government’s pursuit of one of the biggest player on Wall Street. To some extent, it is also about the hedge fund industry which got started around 1950, however, the current form is known for 30 years. Specifically, the book tells the story of Steven Cohen who started one of the largest hedge funds which was called S.A.C. Capital.
For those who need a quick recap, a hedge fund is an investment fund that pools capital from accredited individuals or institutional investors and invests in a variety of assets, often with complex portfolio-construction and risk-management techniques (^1).
When it comes to Steven Cohen, the book provides a really comprehensive introduction – “Steven Cohen changed the Wall Street. He and his fellow pioneers of the hedge fund industry didn’t lay railroads, build factories or invent new technologies, rather they made their billions through speculation by placing bets in the market that turned out to be more right than wrong, and for this, they gained not only extreme wealth but formidable influence throughout society. Hedge funds now oversee more than three trillion dollars in assets.”
Since many hedge funds make money with little small changes in the stock market, any kind of information that they can get about company shares in the nearest future is priceless. And this is the heart of the book as S.A.C. made the process of acquisition of material non-public information into a fine art. Soon, along the Cohen’s empire has become huge, the government started getting suspicious that there were inside trading going on, and as it’s illegal for people who work in industries that are traded on the stock market to share confidential information that may affect the share price.
So the story tells how the government was trying to make their case against Cohen and his top employees. How it was wiretapping and trailing people who might testify against the founder of S.A.C. Finally, in the end, the government had to make a big decision. Are they going to go after one of the biggest players on Wall Street and potentially enter into a huge high-profile trial that everybody would have been watching in the news? And in order to do that they had to take a really hard look at the evidence they had.
Black Edge: Inside Information, Dirty Money, and the Quest to Bring Down the Most Wanted Man on Wall Street
by Sheelah Kolhatkar
Size: 295 pages
Other information and reviews of this book on Goodreads: https://www.goodreads.com/book/show/32284263-black-edge
Other useful links:
Sheelah Kolhatkar’s website: https://www.sheelahkolhatkar.com/
Steven Cohen on Wikipedia: https://en.wikipedia.org/wiki/Steven_A._Cohen
S.A.C. Capital on Wikipedia: https://en.wikipedia.org/wiki/S.A.C._Capital_Advisors
S.A.C. Capital website: https://www.saccapital.com.sg/
Other great book about stock market manipulation: Bad Blood by John Carreyrou
(^1) Hedge Funds and Other Private Funds: Regulation and Compliance; Gerald T. Lins, Thomas P. Lemke, Kathryn L. Hoenig & Patricia Schoor Rube