SAC veteran to face criminal charges

An expanding US investigation into insider trading reached the inner circle of SAC Capital Friday when authorities charged Michael Steinberg, a 17-year veteran of the firm, with trading in advance of Dell and Nvidia earnings.

Mr Steinberg was arrested early on Friday morning at his home, according to a spokesman for the Federal Bureau of Investigation.

He is the eighth employee of SAC, the $15bn hedge fund run by Steven Cohen, to face criminal charges of insider trading in the six years since the FBI launched Operation Perfect Hedge, a unit aimed at rooting out corruption on Wall Street.

Civil charges brought by the Securities and Exchange Commission implicated an additional portfolio manager, Gabriel Plotkin, who also allegedly traded shares of Dell. Mr Plotkin was not charged with any wrongdoing. The SEC alleges SAC and Sigma, an affiliate, made profits and avoided losses totalling $6.4m.

Barry Berke, Mr Steinberg’s attorney, said his client “did absolutely nothing wrong. At all times, his trading decisions were based on detailed analysis as well as information that he understood had been properly obtained through the types of channels that institutional investors rely upon on a daily basis”.

SAC has been trying to put its legal woes behind it. The firm’s legal exposure was heightened in November when prosecutors charged another SAC portfolio manager and linked his activities to Mr Cohen, who has not been charged with any wrongdoing. Since then the firm has been seeking to reassure investors, who have indicated they would withdraw $1.7bn from the firm.

Earlier this month, SAC agreed to pay $616m to settle SEC insider trading allegations, without admitting or denying wrongdoing. Mr Cohen has since been in the spotlight, recently paying $155m for a painting of Pablo Picasso’s mistress, “Le Rêve”.

Mr Steinberg joined SAC in 1996, four years after Mr Cohen launched the firm. Mr Steinberg, who managed $100m, was often seen at parties with Mr Cohen and is a close friend.

“Mike has conducted himself professionally and ethically during his long tenure at the firm,” an SAC spokesman said. “We believe him to be a man of integrity.”

Mr Steinberg was placed on leave last autumn after one of his former analysts, Jon Horvath, pleaded guilty to trading Dell shares based on inside information gleaned from a circle of friends. Mr Horvath said he provided the information to his boss.

Last fall, during the trial of former Diamondback Capital and Level Global portfolio managers involved in the same trading scheme, prosecutors identified Mr Steinberg as an unindicted co-conspirator. They showed an email from Mr Steinberg replying to Mr Horvath’s note about Dell’s third-quarter earnings.

“Yes, normally we would never divulge data like this, so please be discreet,” Mr Steinberg wrote.

Copyright The Financial Times Limited 2017. All rights reserved. You may share using our article tools. Please don't cut articles from and redistribute by email or post to the web.