Steve Cohen & Patricia Cohen: The SAC Capital Divorce That Alleged Insider Trading and Hidden Millions
She alleged he hid millions and used insider-trading profits to start his hedge fund -- then sued him 19 years later
Key Facts
What Happened
Steve Cohen, the billionaire hedge fund manager who founded SAC Capital Advisors and later Point72 Asset Management, divorced his first wife Patricia in 1990. The settlement was modest by billionaire standards: Patricia received $1 million in cash and their Upper East Side apartment, then valued at $3.8 million. At the time, Cohen was a successful but not yet famous trader. Within two years, he would launch SAC Capital with $25 million and build it into one of the most profitable hedge funds in history, with assets peaking at $16 billion.
Nineteen years later, in December 2009, Patricia filed a bombshell lawsuit. She alleged that Steve had concealed a $5.5 million payment from a real estate deal that was pending during their 1990 divorce. More explosively, she claimed that Steve had confided to her that he made $20 million from an advance tip that General Electric was going to acquire RCA in 1985 -- an insider trading allegation that, if proven, would mean the seed money for SAC Capital was tainted by fraud.
The lawsuit became entangled with the broader SAC Capital insider trading scandal. In 2013, SAC Capital pleaded guilty to securities fraud and paid $1.8 billion in penalties -- the largest insider trading penalty in history. Patricia's lawyers argued that this criminal case corroborated her claims that Steve had built his fortune on illegal trades, some of which she was defrauded out of during the divorce.
The case bounced through courts for years. Initially dismissed in 2011, it was revived by an appeals court in 2013, which found the lower court had erred in tossing the fraud claims. But in 2016, a judge finally dismissed the lawsuit, finding 'no evidence that Steven concealed any assets from Patricia during the divorce.' Patricia's attorney obtained third-party litigation funding to pursue the case -- a then-novel approach that has since become common in high-stakes divorce-related lawsuits. Steve Cohen went on to purchase the New York Mets for $2.4 billion in 2020.
Legal Breakdown: Hidden Assets
Reopening a Divorce Settlement for Fraud
Patricia's lawsuit tested whether a spouse can reopen a decades-old divorce settlement based on newly discovered fraud. Most jurisdictions allow this if the challenging spouse can prove that assets were deliberately hidden during the original proceedings. However, the burden of proof is high, and courts are reluctant to relitigate ancient divorces. Patricia's case ultimately failed because she could not prove concealment with sufficient evidence, despite the circumstantial connection to SAC's broader legal troubles.
Insider Trading Allegations in Divorce
Patricia's claim that Steve used insider trading profits to launch SAC Capital was novel and provocative. If proven, it would have meant the entire hedge fund was built on illicitly obtained marital assets. This theory -- that tainted profits from during the marriage should be traced through the company's growth -- pushes the boundaries of marital property law into securities law territory. It was ultimately unproven, but the theory remains available for future cases.
Third-Party Litigation Funding
Patricia's case was notable for its use of third-party litigation funding -- outside investors who financed her lawsuit in exchange for a share of any recovery. This approach, increasingly common in high-stakes litigation, allows less wealthy ex-spouses to pursue claims against billionaire former partners. Without litigation funding, Patricia could not have sustained a seven-year legal battle against Steve's virtually unlimited legal resources.
What This Means for Your Divorce
- →If you suspect your spouse hid assets during your divorce, you may be able to reopen the settlement -- but the burden of proof is high and the process is expensive.
- →Document everything during your marriage, especially conversations about finances, investments, and business deals. These records may be crucial years later.
- →Third-party litigation funding can level the playing field when one spouse has vastly more resources. Explore this option if cost is preventing you from pursuing legitimate claims.
- →The statute of limitations on fraud claims may extend far beyond the divorce itself. Consult a lawyer if new information surfaces about hidden assets.
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This article is based on publicly available court records, news reports, and legal analysis. It is provided for educational purposes only and does not constitute legal advice. No attorney-client relationship is created by reading this content.
Divorce laws vary by jurisdiction. Always consult a licensed attorney in your area before making legal decisions.