(FORTUNE Magazine) – THE SMILE was unforgettable, with lips drawn way back to reveal enviably aligned and gleaming teeth. Yet the eyes were steely and expressionless. Ivan Boesky was consumed by a single goal, which he described in grandly simple terms: to control the biggest pile of money in the world. To do it he became one of history's great crooks. As head of the largest arbitrage firm on Wall Street, Boesky, 49, long led investors and the public to believe that he possessed special skills at betting on the outcomes of takeovers. He cultivated an aura of mystery, employing a press agent to make known his research prowess but never disclosing publicly the results of his investment pools. Arbitrage is a discipline, a ''very judgmental artistic process,'' Boesky told a FORTUNE reporter two years ago. Asked then about rumors that he used insider tips in his trades, Boesky bristled: ''We do not violate the rules. Period.'' The financial world gasped in mid-November when Boesky agreed to pay penance of $100 million -- half of it a fine for violating the Securities and Exchange Commission's insider trading rules, half for a fund to compensate wronged investors and companies who sue. The tips that were Boesky's undoing came from Dennis Levine (facing page). Once caught, Boesky won leniency by cooperating in the government's continuing probe of insider rings, and he reportedly tape- recorded conversations. Since apologizing for his misdeeds the day of the SEC announcement, Boesky has been closeted in meetings or holed up on his 200-acre estate near Bedford, in New York's suburban Westchester County. He apparently fears for his life. Boesky usually travels with a security guard, but after the story broke several armed bodyguards were seen accompanying him in the limousine that delivers him to his Fifth Avenue offices. Boesky may not surface again until he is arraigned in a Manhattan federal court on a criminal charge, as yet unspecified, that could put him in prison for up to five years. The son of a Russian immigrant, Boesky bloomed late. He got a degree from the Detroit College of Law after drifting through three colleges without graduating. Eschewing law practice, he briefly worked as an accountant and clerked for a federal judge who was a relative of his wife, Seema. Boesky's father-in-law, who owned the Beverly Hills Hotel, scorned him. But when Boesky moved his family to New York, his father-in-law paid for their Park Avenue apartment. Boesky found arbitrage in 1967, when he was 30. By last spring, when he reorganized his main investment pool as a private limited partnership, he was worth an estimated $280 million. Money came ahead of sleeping and eating. On weekdays Boesky rose at 5 A.M. after three hours' sleep and worked from 7 to 1 the following morning. He nibbled at health foods, which he washed down with endless cups of coffee. Even at parties, Boesky, a soft-spoken man with elaborately refined manners, talked only business. ''He was pursued by his own demons,'' a friend says. ''They were flogging him.'' Boesky made all his firm's major investment decisions, directors say. The $3- billion limited partnership, heavily financed with debt plus $220 million in equity from partners, held 75 to 100 stocks. He set up the pool so that he could take an outsize 50% of the profits as general partner, plus a management fee. All day Boesky delved into deals, seeking hints of their outcome in his legendary list of contacts. Typically he had two phones in his hands and eight people holding on the 120-line phone console in his office. Even under a dentist's drill, Boesky tried to talk business on the phone. BOESKY ADVERTISED to investors the phenomenal returns possible from buying takeover stocks before the takeovers were publicly known. In the selling documents for interests in his partnership, Boesky included a table showing annualized rates of appreciation that could have been realized in the past from buying stocks five days before the announcement of a deal and holding them until the deal was completed. The SEC has charged Boesky with insider trading between February 1985 and February 1986. Did he use insider information in prior years? Some Wall Streeters think his staff of 90 may have been a smoke screen. One former partner said to FORTUNE two years ago: ''We had the best research on the Street. We did our homework, and we worked very hard, and it didn't add up to a pile of s--- if he got the right phone call from the right guy. There were times you felt like it was all a front in case the SEC walked in.'' Other former associates doubt that Boesky misused confidential information all along. They point out that at least once a year he bet wrong and lost millions on trades. To people and causes he liked, Boesky was generous. He gave the lyricist Sammy Cahn a spare office in his Fifth Avenue suite. The Metropolitan Museum of Art, the American Ballet Theater, and the Jewish Theological Seminary all received his largess. Through one of his companies, Boesky donated $2 million to the United Jewish Appeal-Federation of Jewish Philanthropies during the past three years. ''There have been other knaves in history who didn't remember their fellow human beings,'' observes Morton Kornreich, chairman of the UJA-Federation. ''At least Boesky, however the means were gotten, did remember his fellow man.'' Even in his private affiliations Boesky was given to misrepresentation. Simultaneously with the SEC announcement, Boesky resigned from all his public posts, including an adjunct professorship at Columbia Business School. The dean responded that the resignation was not necessary. Boesky had not fulfilled his promise to teach a course and thus had never been an adjunct professor. Boesky may be in and out of court for years to come. Any investor can sue who thinks Boesky's trades defrauded him of rightful profits in a stock between February 1985 and February 1986. So can any company that thinks Boesky's moves caused it to overpay in takeovers. One of his lawyers, Harvey Pitt of Fried Frank Harris Shriver & Jacobson in Washington, D.C., says claimants can try to collect from the $50-million fund that was set up under the SEC settlement, or from Boesky directly, but not from both. Forking over the $100 million, Pitt adds, has largely wiped out his client. That seems unlikely, for Boesky had time to act to protect his assets. After Levine's arrest, he surely sensed what was coming. In early July, by some accounts, he was beginning to sell off securities to help reduce the limited partnership's huge debt. In August, a business associate says, he received formal notification of an SEC investigation, and subpoenas were sent to all his companies for their trading records. As partial payment to the government, Boesky has handed over his share of a London close-ended trust, Cambrian & General Securities, and a California motel chain. But he still has his share in the limited partnership, for whatever it may be worth. Two years ago he told FORTUNE he owned private companies in Bermuda and had business interests in France. Pitt says he knows nothing about such holdings. How much, if any, of his assets Boesky moved overseas or placed out of reach of creditors in foreign bank accounts, say, or in trusts for his wife or four children, is unknown. Boesky probably will not lead a pauper's life. He may well keep his estate, & whose red-brick colonial mansion boasts wide chestnut floorboards and French Impressionist paintings. His wife and her sister just sold the Beverly Hills Hotel, which they jointly owned, for $136 million. From his front porch, where he can see for miles, Boesky can contemplate his future. If Ivan ever feels that terrible old urge coming on, he could even return to arbitrage. He is barred from operating as a broker-dealer in the U.S. But he can move abroad. Or he could stay home and arbitrage foreign and U.S. stocks on exchanges outside this country, provided the customers are not U.S. citizens. Should every foreign government close its exchange to him, he will still be free, as an individual investor, to buy and sell shares anywhere.