TIME insider trading

Hedge Fund Manager Gets 3 Year Sentence for Insider Trading

Michael Steinberg SAC
Andrew Gombert—EPA Michael Steinberg, former SAC Capital portfolio manager, leaves Federal Court after sentencing in New York City on May 16, 2014.

Michael Steinberg was sentenced to 3 1/2 years in prison for insider trading on Friday. His prosecution was part of a decade-long federal investigation into former hedge fund giant SAC Capital and its billionaire founder Steven A. Cohen

Michael Steinberg, a top lieutenant to billionaire hedge fund mogul Steven A. Cohen, was sentenced to 3 1/2 years in prison for insider trading on Friday after being found guilty last year of securities fraud and conspiracy charges.

Steinberg’s sentencing is the latest black mark on Cohen’s former hedge fund, SAC Capital, which last fall pleaded guilty to securities fraud and agreed to pay $1.8 billion in the largest insider trading fine in U.S. history.

“Michael Steinberg traded on information from company insiders at Dell and NVIDIA to reap nearly $2 million in illegal profits,” Manhattan U.S. Attorney Preet Bharara said in a statement emailed to TIME late Friday. “Today he has learned the steep cost of those transactions.”

Steinberg, 42, was found guilty last December of conspiracy to commit securities fraud and four counts of securities fraud for insider trading involving two tech stocks, Dell and NVIDIA, that reaped $1.8 million.

“For most people on the planet, $1.8 million of gain is a lifetime of accumulated wealth,” U.S. District Judge Richard Sullivan said before he sentenced Steinberg to prison, according to Bloomberg. “Maybe in a hedge fund it’s no big deal but it’s a lot of money to most people.”

Prosecutors had urged Judge Sullivan to sentence Steinberg to more than six years in prison.

Steinberg’s prosecution was part of a decade-long federal investigation into SAC Capital. Last year, SAC was charged with securities and wire fraud for a scheme in which the fund engaged in a pattern of “systematic insider trading” that allowed it to reap hundreds of millions of dollars in illegal profits.

In April, a federal judge in New York accepted SAC’s guilty plea and approved a landmark $1.8 billion settlement with the government, effectively concluding a decade-long criminal investigation. SAC agreed to shut down its investment advisory business, but was allowed to continue to do business under a new name as a so-called “family office” managing Cohen’s $9 billion fortune.

Federal authorities have been investigating SAC for a decade — rumors of insider trading have been swirling around the hedge fund for years — and have secured guilty pleas or convictions from eight of its former employees. Cohen, who remains under investigation by the FBI, has never been charged with a crime.

It appears unlikely that Cohen will ever be personally indicted for his role leading a firm that was “riddled with criminal conduct,” according to federal prosecutors. Cohen does face civil charges from the Securities and Exchange Commission alleging that he failed to supervise his employees, and could ultimately be banned from the securities industry for life.

Steinberg has been granted bail, pending an appeal, according to Reuters.

Tap to read full story

Your browser is out of date. Please update your browser at http://update.microsoft.com


YOU BROKE TIME.COM!

Dear TIME Reader,

As a regular visitor to TIME.com, we are sure you enjoy all the great journalism created by our editors and reporters. Great journalism has great value, and it costs money to make it. One of the main ways we cover our costs is through advertising.

The use of software that blocks ads limits our ability to provide you with the journalism you enjoy. Consider turning your Ad Blocker off so that we can continue to provide the world class journalism you have become accustomed to.

The TIME Team