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This blog said last month that the Feds needed to put Hedge Fund King Steve Cohen behind bars. Now, it looks like the Justice Department lacks the stomach for such a fight and has decided to give SAC Capital and Cohen a free pass.

Yes, SAC in March agreed to pay a record $616 million penalty to the Securities and Exchange Commission to settle two insider trading claims. Remember though, SAC didn't admit to any wrongdoing at the time, and King Cohen was not named as a defendant in the two cases.

Now, it looks like any chance of an imminent criminal case against Cohen has evaporated in the summer heat. So, what caused this lack of zeal from Federal prosecutors? Was it scant evidence or a shortage of guts by the government?

The decision by the Justice Department not to pursue Cohen is a blow to Mom and Pop investors across America who expect the stock market to operate with some fairness and efficiency. Indeed, it's a triumph for hedge fund investors and others who are intent on breaking rules to profit.

Let's take a look at the case against Cohen.

During the last five years, the Feds have obtained 73 convictions and guilty pleas in its overall crackdown on insider trading.

According to a Wall Street Journal article from last week, the Feds have been working their way to the top and had a "diagram of the investigation's target" with Cohen's picture smack "in the middle."

It appeared that the Feds were close to the King. Top SAC trader Mathew Martoma faces trial on insider trading after a doctor tipped him off to a secret drug's clinical trial result. According to the Journal, Martoma spoke with Cohen for 20 minutes on a Sunday in July 2008, and then Cohen made trades that resulted in $276 million in illicit profits.

Cohen, it appears, insulated himself just enough from his traders to scare off a criminal prosecution that would result with him behind bars.

"But this month's deadline is likely to come and go without any action against Mr. Cohen, people familiar with the investigation said," according to the Journal article, which was reported by Michael Rothfeld, Jean Eaglesham and Jenny Strasburg. "The deadline is tied to a five-year statute of limitations to file criminal charges related to his trading activity with the portfolio manager, Mathew Martoma."

The article continued: "Prosecutors hoped to gain information from Mr. Martoma that could be used against his former boss, but Mr. Martoma hasn't implicated Mr. Cohen. When he was approached by two federal agents, Mr. Martoma fainted in the front yard of his Florida home but has refused to cooperate with the government, according to people familiar with the probe."

As this blog said last month, the Feds must go up against Cohen's high priced lawyers and snag the biggest insider trading fish in the sea. The Feds should take a page from the playbook of the aggressive prosecutors in the Boesky-Milken era.

The Feds' failure here hinges on a lack of will rather than a lack of evidence, in this lawyer's opinion.

Disclosure: Zamansky & Associates are investment and stockbroker fraud attorneys representing investors in FINRA arbitration and federal and state litigation against financial institutions.

Source: The Feds Give King Cohen A Free Pass