SAC Capital Partners’s long-time portfolio manager, Michael Steinberg was arrested on Friday by The Federal Bureau of Investigation (FBI). Federal authorities continue deepen their investigation on the alleged criminal insider trading activities of SAC Capital Partners.
The agency charged Michael Steinberg with four counts of securities fraud and conspiracy to commit securities fraud in connection with the allegation that he committed illegal trades in the shares of Dell Inc (NASDAQ:DELL), and Nvidia Corporation (NASDAQ:NVDA) based on information obtained from an analyst. In addition, the Securities and Exchange Commission (SEC) filed an insider trading complaint against Steinberg in the federal court of Manhattan. If convicted, Steinberg could face 20 years imprisonment.
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Steinberg appeared at the federal court in Manhattan for a hearing and was released after posting a $3 million bond. During the hearing, he pleaded not guilty to the charges filed against him.
According to his attorney, Barry H. Berke, “Michael Steinberg did absolutely nothing wrong. At all times, his trading decisions were based on detailed analysis.” He also emphasized that Steinberg obtained information properly from all types of sources used by institutional investors every day.
George Venizelos, FBI Assistant Director-In-Charge of the New York office said, “Mr. Steinberg was at the center of an elite criminal club where cheating and corruption were rewarded. Research was nothing more than well-timed tips from an extensive network of well-sourced analysts.”
In a statement, a spokesperson for SAC Capital Partners said, “Mike has conducted himself professionally and ethically during his long tenure at the firm. We believe him to be a man of integrity.”
Steinberg had been working for SAC Capital Partners since 1997. He closely works with Steven Cohen, founder and manager of the hedge fund. Steinberg is one of the portfolio managers at the Sigma Capital Management, a unit of SAC Capital Advisors.
Last week, SAC Capital Partners agreed to pay a penalty of $616 million to settle two insider-trading allegations of the SEC. However, Manhattan federal court judge, Victor Marrero challenged the settlement and the controversial language in the settlement, which allows SAC Capital to “neither admit nor deny” any wrongdoing in the accusations.
During the approval hearing of the $602 million settlement on Thursday, Judge Marrero pointed out, “It seems counter-intuitive and incongruous to settle a case for $600 million that might cost $1 million to litigate. How believable is it to the public the claim that they did nothing wrong?” He delayed the approval of the deal citing pending litigation challenging the practice of the securities regulator for allowing defendants to settle charges without admission or denial of any wrongdoing.