Black Edge

In 2008, in the midst of the worldwide financial crisis, US federal agents were in the process of taking down Raj Rajaratnam, a Wall Street titan, when they discovered something fascinating.

Rajaratnam was illegally using inside information from companies; he traded on this information and profited from it massively. The agents were intrigued at how one name kept cropping up during interviews with Wall Street insiders: Steve Cohen.

Was there an even larger case waiting to be uncovered? Rajaratnam, it turned out, was small fry – the investigation was only just getting started.

So who is Steve Cohen? Let’s start from the beginning.

Steve Cohen was born in 1956 and grew up in a middle-class family on Long Island, New York. From a young age, he was fascinated with finance.

As a student at the famous Wharton School at the University of Philadelphia, he read the Wall Street Journal every morning and followed the stock market. He was talented too: he played poker with his fellow students and made a lot of money doing so.

In 1978, fresh out of Wharton as a 21-year-old, he landed a job at Gruntal & Co., a New York brokerage firm. Even then, his skills shone through: in one afternoon, he made $4,000, a huge figure in 1978.

Cohen was successful, making $5 million to $10 million a year. But it didn’t take long for the first signs of wrongdoing to appear as he faced charges of insider trading.

In 1985, the Securities and Exchange Commission, or SEC, looked into Cohen’s transactions. Cohen had received inside information through a friend about an imminent takeover of electronics company RCA by General Electric. Cohen invested heavily in RCA shares and made $20 million in profits when the takeover was announced.

Even though the criminal case was later dropped, it strongly indicated Cohen had a somewhat unorthodox approach to trading.