This book is all about insider trading on Wall Street in the 2000’s, mostly at one hedge firm known as S.A.C. Capital Advisors. This hedge firm was started by Steven Cohen, currently the 72nd richest person in the world with $13 billion. The book is essentially the story of Steven Cohen, his company and the attempts to charge them with insider trading. The name of the book refers to edge, which is information that a trader can use to gain an advantage over other traders. Black edge refers specifically to insider information.
The culture on Wall Street in the 2000’s was one that relied on black edge to guarantee profits. Steven Cohen demanded that his associates use black edge to generate profits with limited risk. He protected himself by asking that his traders share their ideas with him with a rating of 1-10 indicating their confidence in the proposed trade. This method allowed the traders to share their insider information with the hedge fund managers without directly indicating where they got the information or whether it was insider information.
The SEC started their focus on S.A.C. Capital Advisors during an active investigation into the prevalence of insider trading on Wall Street. Their investigations consistently brought up S.A.C. as the worst hedge fund on Wall Street that engages in insider trading. The book then describes the most significant cases of insider trading at S.A.C. Capital and the efforts to link Steven Cohen to the trades.
One funny story in the book is about Steven Cohen and his art collection. He was in the middle of purchasing a Picasso painting for a total of $139 million when, just days before the purchase was finalized, the seller accidentally put his elbow through the painting. The painting was repaired over several years and Steven Cohen eventually purchased the painting years later for $150 million. You might have heard about this previously, I vaguely heard about this before I read this book.
I enjoyed this book a lot and I felt that I learned a lot. I listened to this as an audiobook and found myself staying at the gym longer than typical to continue to listen to it longer. Steven Cohen seems like he was a very smart person that did a very good job in hiding his illegal insider trading. I placed this on level 2.
If you like this book, I would suggest The Big Short by Michael Lewis. It is a similar look at the inner workings of the business world, although the subjects of this book are not immoral and a borderline criminal.
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