Every once in a while a fight breaks out on the Wall Street playground. As soon as someone sees one starting to simmer they scream, "FIGHT!" and everyone gathers around to watch. I've been ringside for a few of these epic battles. They usually never disappoint. It's dirty. No rules. Hair pulling is not only accepted, but rewarded.
I remember when I jumped to Argus Partners when it was spun off from the Galleon Group. Actually "spun off" is nice way of categorizing a bloody coup. Raj Rajaratnam was not happy at all with the defection of Krishen Sud and his health-care team (including me.) So when I began making calls to the big brokerages on the Street to let them know Argus was in business, it wasn't a surprise that I received an icy reception. Raj and Gary Rosenbach had told all of Galleon's sales coverage that if they did business with Argus Partners, they couldn't do business with them.
It's ugly: I know most hedge-fund managers would rather go through a sticky divorce and custody battle than deal with a former employee-turned-competitor.
The high-frequency trading debate that erupted this week on the NYSE and CNBC was worthy of making the "best of" reel. Click ahead for some of the best battles in Wall Street history.
By Turney Duff
Turney Duff, a CNBC.com contributor, is a former trader at the hedge fund Galleon Group. He chronicled the spectacular rise and fall of his career on Wall Street in the book, "The Buy Side." Follow him on Twitter @turneyduff.
April 4, 2014
The confrontation between IEX's Brad Katsuyama and BATS Global Markets President William O'Brien at the New York Stock Exchange finally brought an issue that's plagued Wall Street for years to light.
Triggered by Michael Lewis's "Flash Boys," the argument (which you might not even realize included Michael Lewis because Katsuyama and O'Brien went at it) was riveting for many of us traders who knew something was up with the markets. We knew someone was stealing from us — but who?
Maybe I'm biased because Katsuyama figured out the answer to that question, but I say the title belt goes to Katsuyama.
Of course, this really wasn't a fair fight because Katsuyama had his own personal trainer in Michael Lewis. Rooting against him would be like wanting Rocky to lose. Not gonna happen.
In an alternate universe, Icahn-Ackman would be a zen master and a Buddhist monk coming together to guide us. But that wasn't this universe.
These two have been feuding for the better portion of a decade. In this case, Icahn took issue with Ackman's short position (betting that the stock would fall) on Herbalife and characterization of the company as a "pyramid scheme."
Wall Street fights rough but in this case, I have to say — the battle was more like a dance off than a hockey fight. The gloves did come off, but it started out with name-calling: Icahn calls Ackman "a crybaby in the schoolyard," and then says, "I went to a tough school in Queens," before he goes on to attack Ackman.
They take turns cutting each other down for ten minutes. Then, it gets strange. "Fast Money" Host Scott Wapner asks Icahn a simple question: "Are you buying Herbalife and long the stock?" At which point Icahn turns on Wapner and declares that he won't be bullied.
Tough school in Queens? I grew up in Kennebunk, Maine and our playgrounds were rougher than that.
For the record though, the last thing you want to hear when you're sitting at a hedge fund is either Ackman or Icahn taking the opposite side of one of your positions. It's like going to the mailbox when you applied to college and you pull out a very thin envelope. You just know it's not good news. But when you get these two on both sides of a trade it's time to put your feet on the ground and take notes.
Decision: Ackman wins (the war of words, anyway)
It was Valentine's Day 2001. Gary Rosenbach and David Slaine, both partners of the Galleon Group, went to the Reebok gym together. It was 6 o'clock in the morning. After the workout, they ended up in the steam room — although not alone. What happens next has been told many times and in varying ways.
Naked and holding his towel, sweat dripping from his face, Gary starts riling David about being bullish this year. "We're losing money cause of you!" he said.
Slaine, with his muscles glimmering in the steam, warns Gary to stop,not once, not twice, but THREE times. But Gary doesn't stop. Gary doesn't know what "stop" means when it comes to belittling people.
Gary's voice is high-pitched and whiny like a dentist's drill. Slaine even tells Gary, like Babe Ruth calling his shot, what he was going to do if Gary continued. But Gary continued. And that's when it happened …
An open-hand slap.
It's always about money — or, I should say, losing money. It's a time when all Wall Streeters must navigate to survive. For a hedge fund, a long stretch of bad luck or poor decision-making will lead to negative returns causing binary consequences: Hindsight and looming clouds.
And sometimes ends with a bitch slap.
Decision: Nobody wins
Insider trading was all the rage before Michael Lewis's "Flash Boys" made HFT the hot topic. This fight is still ongoing with a few more rounds to go.
The rule used to be "nothing in print." If you needed to share a secret you got on the phone, you'd suggest someone calling you on the "outside" meaning your cell phone or at home at night. But wiretaps have changed the game.
Eight SAC employees have so far been convicted of insider trading and the firm agreed to pay a $1.8 billion penalty but, despite years of investigations, wiretaps, informants and whatnot, they haven't been able to get SAC founder Steve Cohen on insider trading. The thread they're hanging on to now is "failure to supervise employees" who were insider trading — we'll see if that one sticks.
Do I think Steve Cohen is guilty? Probably, but so are thousands of other traders. Do I think he should be convicted? No, not until I see the evidence. Innocent until proven guilty is the only way this works. I'm not about to start hashtagging #freestevecohen but today he should be free to trade.
My only hope is that if this ever gets made into a movie that Aaron Sorkin ("A Few Good Men") is hired to write the courtroom scenes ("You can't handle the truth!"). This is two heavyweights putting every ounce of energy into the ring. Both fighters will leave nothing left.
Decision: I think Don King said it best: "It ain't about if he knocks a guy out. It's about how he knocks a guy out. It's the style, the improvisation." I'm not sure if he's talking about Mike Tyson or the Fed. But the Fed is getting style points.
Lehman Brothers was one of the poster children for the financial collapse in 2008.
To hear Dick Fuld tell the story, the price of LEH shares had nothing to do with balance sheets and economic condition of the firm — it was those damn short sellers.
Fuld took to the Lehman Brothers trading floor with a locker-room inspired speech trying to rally the troops, "Let's get these bastards!" he cried. But the problem was, that the traders weren't sure if he was talking about them or the short sellers. Fuld declared war and promised sweet revenge.
He was so obsessed with short sellers that one congressman said his judgment about the actual financial standing of his firm may have been "clouded," according to the Wall Street Journal.
Even after the firm filed for bankruptcy, he was still yelling about the short sellers.
Fuld was in talks with Warren Buffett for the Oracle of Omaha to invest $2 billion as a lifeline to Lehman but Buffett was finding a few things troubling, including the fact that Fuld wouldn't agree to have executives buy in under the same terms and Fuld's obsession with short sellers. Before Buffett could even turn him down, Fuld called Buffett to say he couldn't accept the terms.
As the movie based on Andrew Ross Sorkin's "Too Big to Fail" book tells it, Fuld said to Lehman CFO Erin Callan, "Screw Warren Buffett."
Those are some fighting words. There are a few people you never take a shot at: Jesus, Shakespeare, Eminem and Warren Buffett.
I was short LEH and when I heard his comments it only made me want to short more. Sometimes it's not what a person says, but how they say it. In my opinion, Fuld's biggest weakness was he didn't know how to negotiate from a place of weakness — ironic.
Decision: No contest
The controversy over how much Dick Grasso was paid as CEO of the New York Stock Exchange pitted former Attorney General Elliot Spitzer against former NYSE board member Ken Langone. Spitzer, who earned the nickname the "Sherriff of Wall Street," was convinced Langone helped land his friend such a big paycheck. So, in addition to suing Grasso and the NYSE, Spitzer also sued Langone.
This wasn't about money. The amount to settle would have been inconsequential to Langone. He wanted revenge. In 2008, the New York State Court of Appeals dismissed the case. Spitzer had already dropped out of this fight.
When the Eliot Spitzer prostitution scandal erupted, which resulted in him being ousted as governor of New York, there was a lot of talk that his many enemies on Wall Street may have been behind it. And, while most guys on Wall Street would never admit such a thing, preferring to leave it to the rumor mill, Langone made some unusual statements on CNBC when asked if he was surprised by the Spitzer scandal. Langone replied:
"Not at all. I had no doubt about his lack of character and integrity. It would onlybe a matter of time. I didn't think he would do it this soon — or the way he did it. But I know for example, for sure he went himself to a post office and bought $2,800 worth of mail orders to send to the hooker."
During the interview, he was asked how knew that.
"I know it. I know somebody who was standing in back of him in line…." Langone replied. (Watch the clip.)
I wasn't really in a position to cast judgment against Spitzer. I'd made enoughof my own mistakes. He was going to "clean-up" Wall Street which ultimately would be good for business. But if I saw him walking down the street, I would have crossed to the other side before he saw me. Maybe I'm a sucker for loyalty. I mean, I understand Spitzer's position on this, but to me, Langone fighting for what he believed was admirable.
By Turney Duff
April 4, 2014
More From Turney Duff:
On 'Flash Boys' and the HFT fallout: 'We knew someone was stealing'
Time to stop hating on Wall Street
10 tips for young Wall Street
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