Prosecutors Urge Tougher Sentence In SAC Insider Trading Case

SAC Capital AdvisorsSee page for author [Public domain], via Wikimedia Commons

As those responsible for the 2008 derivatives crash remain largely unaccountable for a crash that has deep market ramifications, US prosecutors are urging a federal judge to impose a stiff 6 ½ year prison sentence for insider trading in the Michael Steinberg / SAC Capital case.

In a New York federal court filing, prosecutors said Steinberg should be sentenced one additional year than the court’s probation office had called appropriate.

“Get me edgy, proprietary, market-moving information”

On December 19 ValueWalk reported, a federal jury in Manhattan found Steinberg guilty on all five counts of conspiracy and securities fraud that he faced. Prosecutors said Steinberg traded on confidential information that was passed to him by an SAC analyst, who later admitted to swapping illegal tips with friends at other firms.  In a scene that might have come out of the original Wall Street movie, former SAC analyst Jon Horvath testified that Steinberg told him: “What I need you to do is get me edgy, proprietary, market-moving information that we can use to make money on these stocks.”

US prosecutors encouraged U.S. District Judge Richard Sullivan to sentence Steinberg to 5-1/4 to 6-1/2 years in prison and order him to forfeit $365,142, while Steinberg’s lawyers had requested a two-year sentence.  Sentencing takes place this Friday.

SAC’s Steinberg among eight convicted of insider trading

Steinberg is among eight current or former employees of SAC Capital convicted of insider trading. This comes amidst a background where SAC Capital itself also pleaded guilty to fraud charges and has agreed to pay $1.8 billion in criminal and civil settlements.  The founder of SAC Capital, Steven A Cohen, has not been charged.  The US Securities and Exchange Commission, however, has launched an administrative action to bar him from the securities industry for failing to supervise its portfolio managers and prevent the abuse.

In their motion Friday, prosecutors argued the judge should attribute to Steinberg $1.83 million in losses they alleged Cohen avoided by selling Dell stock at Steinberg’s recommendation in August 2008, shortly before the fall of Lehman and the collapse of the stock market.  In doing so it bolsters the argument that Steinberg personally made significant profits in his portfolio thanks to insider information and, under federal sentencing guidelines, result in a higher sentence than the recommended 4-1/4 to 5-1/4 years in prison.

Change in focus

SAC Capital recently changed focus, renaming itself Point72 Asset Management as it focusing on operating as a less regulated family office that trade’s mostly Cohen’s personal fortune.



About the Author

Mark Melin
Mark Melin is an alternative investment practitioner whose specialty is recognizing a trading program’s strategy and mapping it to a market environment and performance driver. He provides analysis of managed futures investment performance and commentary regarding related managed futures market environment. A portfolio and industry consultant, he was an adjunct instructor in managed futures at Northwestern University / Chicago and has written or edited three books, including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008). Mark was director of the managed futures division at Alaron Trading until they were acquired by Peregrine Financial Group in 2009, where he was a registered associated person (National Futures Association NFA ID#: 0348336). Mark has also worked as a Commodity Trading Advisor himself, trading a short volatility options portfolio across the yield curve, and was an independent consultant to various broker dealers and futures exchanges, including OneChicago, the single stock futures exchange, and the Chicago Board of Trade. He is also Editor, Opalesque Futures Intelligence and Editor, Opalesque Futures Strategies. - Contact: Mmelin(at)valuewalk.com