Book review: Black Edge: Inside Information, Dirty Money, and the Quest to Bring Down the Most Wanted Man on Wall Street By Sheelah Kolhatkar
Finished reading: 09 April 2017
This book focuses on operations of SAC Capital which is also currently being roughly portrayed in the current TV series Billions.
The book is the most in depth account of the various indictments and convictions that occurred from the operations at SAC Capital. The book goes into more detail around particular trades that were investigated by the ACC and FBI. What I found particularly interesting was the insight into how SAC operated in order to prevent Steven Cohen from directly receiving insider information. The book also highlighted the ruthless nature of Steven Cohen towards his portfolio managers and how he would use them as a source of illegal tips from their networks but as soon as any trouble was caused or bad tips were received he word dispose of them immediately.
I found it disappointing that many of the convictions that were achieved have now been overturned on appeal and the definition of Insider trading has now been made more difficult to prove as it requires that the government must prove that the tippee knew “that the tipper disclosed the information for a personal benefit and that the tipper expected trading to ensue.
Overall I found it fascinating how SAC was able to operate for so long blatantly trading on inside information and how everyone turned a blind eye to it especially other firms in the market such as brokers who were directly benefiting from the high level of commissions paid to them from SAC capital.
Insider trading acts as a tax on the market whereby although there are no specific identified victims the profits flow to those who have the benefit of the information and it acts as a tax or cost to those who do not have information as they are on the opposite side of the trade.
Conclusion
The book was very well written but I didn't take away many new insights from the book apart from understanding more around SAC Capital operations and how it is far more difficult to prosecute Insider trading going forward.
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