Black Edge: Inside Information, Dirty Money and the Quest to Bring Down the Most Wanted Man on Wall Street. By Sheelah Kolhatkar. Random House; 344 pages; $28.

IN THE late 1990s your reviewer worked on the trading floor of a bank. It was understood there that if you walked out of a meeting with profitable gossip about, say, a takeover, one client should always get the first phone call: SAC Capital, an American hedge fund, run by Steven Cohen. “Stevie” was, according to his legend, a day-trading idiot savant, a bully and a moneymaking genius who, when he wasn’t staring at his screens, was trying to prove his sophistication by paying top dollar for trophy works of art, such as Damien Hirst’s pickled shark. He paid so much in fees that the banks ate out of his hands.

Almost 20 years on Mr Cohen’s strange ascent to the pinnacle of American society, and the efforts of regulators to jail him for insider dealing, are the subject of Sheelah Kolhatkar’s excellent new book, “Black Edge”. Earlier books on Wall Street, such as “Barbarians at the Gate” and “Liar’s Poker”, describe the macho era of junk bonds and leveraged buy-outs in the 1980s. “Too Big to Fail”, which came out in 2009, recounts the bail-out of those banks. “Black Edge” tackles the rise of speculative hedge funds over the past two decades, of which SAC was, for a while, perhaps the most powerful.

In the late 1990s it became harder for investors to beat the market. The “Reg FD” rule, passed in 2000, required companies to disclose information to all investors at the same time. Computing and brain power rose on Wall Street, with the cream of the Ivy League crunching data for nuggets that others had not spotted. In the arms race to find a new “edge”, some firms installed their computer cabling close to the stock exchange to get data a millisecond faster. Mr Cohen took a different route.

Having learned the ropes at an old-school firm, he set up SAC as a kind of corporate espionage agency. He paid huge commissions to banks for information. By 1998 he was Goldman Sachs’s biggest equities client. And he hired analysts to befriend talkative strangers at companies or watch factory gates in Taiwan; anything to get an advantage to help Mr Cohen’s trades. Before the financial crisis SAC had $17bn of assets and an average annual return of 30% for 18 years, an enviable record.

Too good, concluded regulators, who laid siege to SAC to try to prove that the firm was profiting from insider information. Eventually, several traders and analysts pleaded guilty or were convicted. Mathew Martoma, a habitual liar who had been expelled by Harvard Law School for faking his grades, and who made huge illegal trades on pharmaceutical firms, was jailed. But Mr Cohen always managed to be several steps away from the insider information. In 2013 SAC at last agreed to say that it had engaged in fraud, to close its doors to outside money and pay a fine. Mr Cohen, who has not admitted guilt, will be free to open a new fund next year.

Three themes stand out in “Black Edge”. One is the hollow life of the protagonist. Clad in a fleece, surrounded by 12 screens, masseuses, a manipulative wife, a hostile ex-wife and a cast of millionaire sycophants whom he periodically culls, Mr Cohen cuts a sad figure. The second theme is the decay of the industry’s ethics. The banks still do business with Mr Cohen, and if he opens a new fund, supposedly reputable firms will line up to give him money. The last theme is the feebleness of enforcement. Mr Cohen’s government pursuers were comprehensively outwitted by his lawyers. In fictional accounts of high finance—in Tom Wolfe’s novel, “The Bonfire of the Vanities”, or “Wall Street”, directed by Oliver Stone—the courts ultimately bring the biggest egos crashing down. In real life the law has much less power.