Most scandals involving the cozy relationship between Wall Street and its regulators play out behind closed doors. Others happen in plain view, and this is one of the latter. In a Manhattan courtroom Thursday, a federal judge held a hearing on whether to approve a legal settlement in which Steven A. Cohen, one of the richest and most publicity-shy men in the country, appears to be buying off the U.S. government, which for years has been investigating wrongdoing in and around his hedge fund, SAC Capital Advisers.

Unless the judge, Victor Marrero, rejects the settlement between the Securities and Exchange Commission and SAC, which was announced a couple of weeks ago, Cohen will be free to go about his business, which has long been clouded by suspicions of insider trading, once he writes a check of six hundred and sixteen million dollars to the Securities and Exchange Commission. There will be no further sanctions and no admission of wrongdoing. And in fact, Cohen already appears to be celebrating. According to a report in the Times, he has just purchased a Picasso painting, “Le Rêve,” for a hundred and fifty-five million dollars, and an ocean-front mansion in East Hampton, for sixty million dollars.

To his credit, Judge Marrero has, at least for now, refused to go along with this travesty. Reserving judgement on the case, he asked why the settlement didn’t include an admission of wrongdoing on the part of SAC and Cohen. “There is something counterintuitive and incongruous about settling for six hundred million dollars if it truly did nothing wrong,” the judge said. (A lawyer for SAC told the judge that the firm paid the fine because it didn’t want litigation hanging over its head for years.)

When the S.E.C. announced the agreement on March 15th, it played up the size of the settlement, most of which related to allegations of insider trading in the stocks of two big drug companies. “These settlements call for the imposition of historic penalties,” said George S. Canellos, the acting enforcement director of the S.E.C. But one man’s “historic penalty” is another’s drop in the ocean. The fund itself is paying the fine, but it is owned by and essentially synonymous with Cohen, its founder, who is worth $9.5 billion, according to the Bloomberg Billionaires Index. The settlement was arguably the trade of his life. For 6.5 per cent of his fortune—the equivalent of four Picasso paintings—he has gone a long way toward removing a threat that could have destroyed his firm and possibly seen him facing charges.

Exactly how Cohen pulled off this feat is something of a mystery. The details of the dealings between his lawyers and the government haven’t been revealed, and most likely won’t be. What we do know is this: until the settlement with the S.E.C. was announced, things were looking increasingly grim for Cohen and his firm, which is based in Greenwich, Connecticut.

During the past several years, investigators from the S.E.C. and the U.S. Attorney’s office in Manhattan have been carrying on a wide-ranging investigation of SAC, which manages about fifteen billion dollars in assets. As a result of this probe, no fewer than nine current or former employees of SAC have been tied to insider dealing while working at the firm, and four of them have pleaded guilty. The investigation started out with lowly former employees. Over time, though, it moved closer and closer to Cohen, the firm’s founder, until, finally, it enveloped him.

Last November, Preet Bharara, the U.S. Attorney for the Southern District of New York, held a press conference to announce the indictment of Matthew Martoma, a former SAC trader, for what Bharara said was “the most lucrative insider-trading scheme ever charged.” According to the complaint, the 2008 trades at the center of the case involved Cohen directly. After receiving at tip-off from an inside informant about a drug trial that had turned out badly, Martoma spoke for twenty minutes with Cohen—identified as “Portfolio Manager A”—and then started unloading shares that SAC owned in the two drug companies involved, Elan and Wyeth, the complaint said. Once the results of the drug trial became public, the stock prices of the drug companies fell sharply. The government said that Martoma’s trades netted SAC as much as two hundred and seventy-six million dollars.

The lack of any admission of wrongdoing on SAC’s part would be astounding if such omissions hadn’t become depressingly common in recent settlements between the government and Wall Street firms. In the aftermath of the financial crisis, Judge Jed S. Rakoff, one of Marrero’s colleagues on the district court, initially rejected S.E.C. settlements with Bank of America and Citigroup over their misconduct. But the government, for whatever reason, persists in allowing Wall Street firms to resolve big cases without admitting the obvious: the reason they are paying large fines is that they did something wrong.

It’s a farce, and it’s not getting any funnier. The SAC settlement marks the first time, to my knowledge, that the S.E.C. has accorded such deference to a hedge fund, and it also raises the question of whether the Justice Department is now ducking bringing criminal charges against Cohen himself. Some folks who know how the system works from the inside think that that’s what it looks like. “I read the Martoma complaint,” Bradley Simon, a prominent white-collar criminal defense attorney and former federal prosecutor, told me. “It seems like there’s evidence there for them to charge Cohen, but they don’t want to do it.”

In his press conference announcing the settlement, the S.E.C.’s Canellos said the deal didn’t mean that the Justice Department couldn’t bring criminal charges against more SAC employees in the future. Legally, that’s true. But the S.E.C. and the Justice Department usually coöperate on settlements of this sort. According to a report in the Times, prosecutors are currently deciding whether to indict Michael Steinberg, a portfolio manager at SAC. [UPDATE: Steinberg was arrested on Friday morning.] But the larger question is what happens to Cohen, who was widely presumed to be the government’s ultimate target.

In cases of this nature, the defendant’s lawyers usually deal with the possibility of criminal charges first, because that is the biggest danger. It’s only when the criminal issue has been resolved that they go ahead and try to resolve any civil charges. “If Cohen thought they were going to bring a criminal case against him, I don’t think he would be writing checks to the S.E.C.,” Simon said. “It looks to me like he has had some indication that the criminal investigation is going nowhere. He thinks they are not going after him with criminal charges. And the question is: Why not?”

Why not indeed? Perhaps Cohen didn’t do anything wrong. Back in November, after Martoma was charged, Jonathan Gasthalter, a spokesman for SAC at the P.R. firm Sard Verbinnen, said, “Mr. Cohen and SAC are confident that they have acted appropriately and will continue to coöperate with the government’s inquiry.” After the settlement with the S.E.C. was announced, Gasthalter said: “This settlement is a substantial step toward resolving all outstanding regulatory matters and allows the firm to move forward with confidence. We are committed to continuing to maintain a first-rate compliance effort woven into the fabric of the firm. Steve Cohen has not been charged with any wrongdoing and has done nothing wrong.” When I spoke to Gasthalter on Thursday, he declined to comment on the court hearing about the settlement or on speculation that the government had ruled out bringing charges against Cohen.