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Hedge fund manager Steven Cohen, founder and chairman of SAC Capital Advisors LP. SAC’s returns averaged roughly 30 per cent a year over the last two decades, a performance which turned Mr. Cohen’s firm into a colossus that manages $14-billion (U.S.), much of it his own money.Steve Marcus/Reuters

In the hedge fund world – a land of outsized profits and enormous egos – they don't come any bigger than Steven Cohen.

There's the gigantic estate in Greenwich, Conn., complete with its own ice-skating rink and Zamboni machine. There's the glittering art collection, reported to include works by Vincent Van Gogh, Paul Gauguin, and Jackson Pollock.

And of course, there's the track record: returns averaging roughly 30 per cent a year over the last two decades, a performance which turned Mr. Cohen's firm into a colossus that manages $14-billion (U.S.), much of it his own money.

Now signs are growing that U.S. authorities intend to pursue him over allegations of illegal insider trading at SAC Capital Advisors LP, the firm he founded in 1992.

On a conference call with investors on Wednesday morning, SAC revealed that it had received a notice last week from the U.S. Securities and Exchange Commission indicating that it is planning to file civil charges against the firm.

The notice doesn't name Mr. Cohen, but authorities are considering extending the charges to include him, Bloomberg News reported.

The development comes only days after U.S. authorities filed criminal and civil charges against a former SAC trader, Matthew Martoma. They accused him of turning confidential information about a pharmaceutical drug trial into trades worth $276-million.

Mr. Martoma made those trades, authorities alleged, in consultation with someone identified in court documents as "Portfolio Manager A" and the "hedge fund owner." Though he is not mentioned by name, those descriptions refer to Mr. Cohen. Mr. Cohen, 56, has not been charged with any wrongdoing.

Early on Wednesday, Mr. Cohen spoke to investors for about a minute at the start of the conference call, according to reports. Regarding the recent allegations, he said, "We take these matters very seriously, and I am confident that I have acted appropriately," The Wall Street Journal reported.

A spokesman for SAC said he had no further comment beyond a statement issued last week, where the firm also said its conduct was appropriate and that it would continue to co-operate with U.S. authorities.

"The government's investigation is moving closer to the finish line," said Jacob Frenkel, formerly a federal prosecutor and lawyer with the SEC. "Who's going to cross it and in what position is yet to be determined."

The key question is whether Mr. Cohen will face any charges. The government's sprawling investigation into insider trading has already netted several big fish – hedge fund manager Raj Rajaratnam and former McKinsey & Co. chief Rajat Gupta – but Mr. Cohen would be by far the most prominent investor pursued by authorities, should they proceed.

His investing performance has long elicited both envy and suspicion. The murmurings have grown louder in recent years as the government probe turned up numerous connections to SAC. Mr. Martoma is the fifth former employee of Mr. Cohen to face insider-trading charges related to his time at the firm.

The Connecticut-based company is known for its sink-or-swim ethos, which is harsh even by hedge fund standards. Winning traders are rewarded handsomely while anything less means an unceremonious exit. In its complaint against Mr. Martoma, the government claims that he reaped a windfall for SAC through illegal trades and received a bonus of $9.3-million. But less than two years later, he was fired. One executive described him in an e-mail as a "one-trick pony."

For now, it appears that Mr. Cohen's investors are not stampeding to withdraw their funds, although that could change quickly. Three former employees of SAC declined to discuss its culture and investment approach.

As for Mr. Cohen, he has poured some of his estimated $8.8-billion fortune into his Connecticut home (after numerous additions, it now measures more than 35,000 square feet) and into expensive artwork. He reportedly paid $8-million for a work by Damien Hirst which consists of a shark in a tank of formaldehyde.

"Art is a great diversion from looking at numbers," Mr. Cohen told The Wall Street Journal in a rare interview in 2006.

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Cohen & Company Inc
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