Hedge fund manager Steven A. Cohen is the founder and chairman of SAC Capital Advisors. (STEVE MARCUS/REUTERS)

All sides are playing hardball as the deadline to bring criminal charges against Steven A. Cohen nears, with only two months left for the government to snag the hedge-fund industry guru in what it describes as the most lucrative insider-trading scheme it has pursued.

The clock started ticking in July 2008, when one of Cohen’s portfolio managers allegedly got secret tips about the results of a clinical trial involving an Alzheimer’s drug, enabling the hedge fund and others to make more than $276 million.

While the government has accused several of the hedge fund’s current and former employees of illegal trading in the past, it has never accused Cohen of wrongdoing. The Alzheimer’s drug case stands out because it is the first to tangentially connect the billionaire to an illegal transaction, suggesting that the industry’s godfather may be in the government’s crosshairs.

The outcome involves high stakes for both Cohen and the government, experts tracking the case said. Prosecutors have been working their way up the hierarchy at the hedge fund for years, they said, and this case gives them their best shot at Cohen — if they can act before the five-year statute of limitations lapses July 21.

“If July comes and goes and they don’t bring an indictment against Cohen, the U.S. attorney’s office is going to look pretty bad,” said Bradley Simon, a former federal prosecutor in New York and Washington. “If they go after the lower level people in the company and allow (Cohen) to go uncharged, it will send a message that they’re either not up to the task or they’re afraid to go after him.”

The U.S. attorney’s office in Manhattan declined to comment, as did a spokesman for the hedge fund, SAC Capital Advisors, in Stamford, Conn.

But several white-collar crime attorneys say this is crunch time for the government.

Prosecutors typically work complex cases almost to the deadline, indicting people a day or two before time is up, said Frank C. Razzano, a former federal prosecutor in New Jersey. Prosecutors want to use all the time they’ve got to prepare a case because a defendant can ask for a trial within 70 days after he or she is indicted, he said.

“They want to be sure that they have run down every possible lead before they return the indictment,” Razzano said. “This is the homestretch for the government.”

To extend the deadline, prosecutors can negotiate a “tolling agreement,” in which firms or people under investigation agree to waive the five-year limit.

Federal authorities have not publicly accused Cohen of wrongdoing in the Alzheimer’s drug case, and it’s unclear whether Cohen has been approached about a tolling agreement. He and his firm have consistently maintained that they have acted appropriately.

If Cohen were to refuse a tolling agreement, he could force the government to bring charges and risk having more investors flee his hedge fund. This year, investors have pulled $1.7 billion from the fund, which has about $15 billion of assets under management — most of it belonging to Cohen or SAC employees.

If Cohen were to waive the deadline, he would leave open the possibility of resolving the issue without an indictment, but expose himself to scrutiny by federal authorities for longer.

His firm already settled two civil cases with the Securities and Exchange Commission in March for $616 million. The firm did not admit wrongdoing. One of the cases involved the the Alzheimer’s drug trades and resulted in a $602 million penalty — a record sum for an insider-trading case. That case awaits final court approval.

A senior SEC official said at the time that the settlements did not preclude the agency from filing charges against Cohen or his firm.

Late last week, SAC sent a letter to investors saying it will no longer unconditionally cooperate with federal authorities. The New York Times reported that Cohen and other SAC employees have received subpoenas to testify before a grand jury.

The move reveals a little something about SAC’s thinking, said Adam Pritchard, a law professor at the University of Michigan Law School at Ann Arbor.

“If there can be a civil resolution and a fine, then cooperating is a reasonable strategy,” Pritchard said. “But if you’re looking at the prospect of jail time, you’re going to make the government prove their case, and you’re not going to help them make their case.”

Peter Henning, a law professor at Wayne State University Law School in Detroit, said the government may end up going after the hedge fund, instead of its owner.

The portfolio manager accused of insider trading in the Alzheimer’s drug case — Mathew Martoma — has not pointed a finger at Cohen. Neither has Michael Steinberg, one of Cohen’s top lieutenants at SAC, who also was indicted on insider-trading charges in March. Both men maintain their innocence.

“Nobody has turned on Cohen, so it may come down to the next best thing: his firm,” Henning said. “If you can’t get the top person, go after the company.”

At least one investor is not too worried.

Ed Butowsky, managing partner at Chapwood Investments, said SAC is one of the best at what it does and that the returns his clients have received from investments there have been strong. Besides, if Cohen or SAC needed to return the money for any reason, doing so should be “little problem” because their holdings are very liquid, he said.

“My clients’ tails are wagging because the returns are good,” Butowsky said. “I do not have any plans to change my position in SAC based on the information I have as of now.”