Will Steve Cohen be indicted?

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The question of the moment is whether SAC Capital founder, a controversial figure who has been in the cross hairs of investigators, will be indicted for insider trading.

No one doubts that the government would love to bring such a case, and to read some media accounts, prosecutors may be getting closer. With the indictment of former SAC Capital portfolio manager Mathew Martoma, DealBook suggests that prosecutors have moved an "inch closer" to indicting Cohen. Others hold that the government is "Closing in on Steve Cohen."

But is there really an indictment looming?

Based on the trials seen so far, the government would need two things in order to make for the strongest possible case: Wiretap evidence and a cooperating witness who can detail crimes from the inside. That one-two punch has proven devastatingly effective for the prosecution in other cases. In the case of Cohen, it is unknown what kind of wiretap evidence the government has. When it comes to flipped witnesses, it would appear that the government has run into some issues.

Martoma would have been a strong candidate on the surface. He was a co-conspirator that could rat out the ultimate target. John Sylvia is the Co-chair of the Securities Litigation Practice at Mintz Levin says, "The filing of the complaint could be an effort to up the ante insofar as the magnitude of the alleged insider trading profits/losses avoided -- $875 million -- adds many years onto the sentencing guidelines should Martoma be convicted." You can imagine that prosecutors sought to turn him with gusto, But he has apparently decided to honor the code of omerta. We're seeing the punishment now. The deal all along was that cooperation would result in lenient treatment. But the government just took off the gloves.  

For prosecutors, this has to be disappointing. It's not clear whether they have any other options in terms of alleged co-conspirators that might become witnesses.

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