Despite paying the highest penalty in recorded history for insider trading, Steven Cohen's 2013 earnings will likely exceed the $1.8 billion in fines he has paid to settle the charges against SAC Capital, according to people close to Cohen's hedge fund. SAC is having a strong year of investment returns, managing to slightly outpace the S&P with what I'm told is a roughly 25 percent gross return so far this year.
SAC began the year with roughly $15 billion in assets under management, with $9 billion representing Cohen and senior employees' money and the remainder outside capital. While outside investors will have had all of their capital returned to them by year-end (and have been redeeming throughout the year), the firm was able to earn significant profits on their money nonetheless.
Outside investors have paid SAC fees equal to 3 percent of their assets for the management of their money and 50 percent of the profits on their money. Meanwhile Cohen and other firm insiders also pay (themselves) fees equal to 25 percent of the profits along with the management fee. The net result is that with a roughly 25 percent return, outside investors net about 16 percent for the year thus far, while Cohen has realized a 21 percent return on the $9 billion in the fund that largely belongs to him.
(Read more: SAC, prosecutors are ready to settle: Sources)
In the fanciful world of hedge fund compensation, Cohen will have a very good year. His 21 percent return on the money that's his will come to about $1.6 billion (using $8 billion as an estimate) while he also is entitled to $750 million from his outside investors (50 percent of the profits off a 25 percent return on $6 billion). Since some of that money has already left the firm, the dollar profit for Cohen is less than that, but the point seems easy to prove. Steven Cohen is poised to earn at least $2 billion from profits on his own money and that of his departing outside investors, which exceeds the penalty he will be paying the government.
A call and email to a spokesperson at SAC were not returned.
—By CNBC's David Faber. Follow him on Twitter: @DavidFaber