The Morning Brief: What’s Behind Steve Cohen’s Shopping Spree?

Is SAC Capital Advisors’ Steven Cohen thumbing his nose at regulators? Soon after his firm agreed to write a $616 million check to the Securities and Exchange Commission as settlement for two insider trading cases, Cohen was reported as paying $155 million for Picasso’s world-renowned “Le Rêve” in one of the most expensive art deals ever. You’d think he’d spend some time kicking back and enjoying the painting. Yet there he is again, snapping up a prime oceanfront property in the Hamptons for $60 million, according to a Thursday report. Presumably some of this cash is coming from the $115 million or so he hopes to ring up from his duplex apartment in New York’s Bloomberg Tower, reportedly up for sale. The billionaire certainly one of the deep-pocketed hedge fund managers around, but the timing of the deals may be more than mere coincidence. Cohen seemed to be sending a not-so-subtle message to the authorities. As in, “Hey fellas, that was a rounding error.” Last year Cohen made more than twice what he agreed to pay the government. (Watch for Institutional Investor’s Alpha’s Rich List 2012, coming out shortly) The settlement is also slightly more than the $585 million that he earned in 2011. Indeed over the past three years Cohen has made roughly $2.3 billion, or nearly four times what he agreed to pay the government.

Meanwhile, the $602 million portion of his SEC settlement could be in jeopardy. U.S. District Judge Victor Marrero raised questions about one of the provisions of the deal allowing SAC Capital to settle the charges without admitting any wrongdoing. This is the same provision a federal appeals court judge, Judge Jed Rakoff of the Second U.S. District Court in Manhattan, objected to in the SEC’s settlement with Citigroup in 2011. Last week SAC Capital agreed to pay $602 million in the largest insider trading settlement in history. The charges stemmed from alleged trades made by former portfolio manager Mathew Martoma related to an Alzheimer’s drug being jointly developed by two drug companies, Elan and Wyeth. SAC Capital and four hedge funds managed by its CR Intrinsic were added as defendants in the civil suit. Separately, Sigma Capital Management, another SAC unit, also earlier agreed to pay nearly $14 million to settle SEC charges that it engaged in insider trading after obtaining nonpublic information about Dell and Nvidia.

Another hedge fund is shutting down. Henri Capital, which was spun out from London giant Winton Capital, has decided to close down after less than two years of operation. The fund was launched by Joey Huang and Filip Wuytack to manage Winton Octo, an equity long-short portfolio they had been managing at while at Winton.