Federal prosecutors have dropped charges against Michael Steinberg (and six others) following his 2013 conviction for insider trading.
Michael Steingberg, a former fund manager at SAC Capital Advisors LP, was convicted by a jury of his peers for his role in a perceived insider trading case where he was accused of scheme that pocketed over $1.8 million in ill-gotten gains through the trading of tech stocks.
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Michael Steinberg was the longest-serving employee at SAC Capital Advisors accused of wrong-doing. An additional six people who pleaded guilty and cooperated with prosecutors were also “exonerated” today.
The about face from prosecutors came after the Supreme Court refused to review an appeals-court ruling that made similar prosecutions considerably more difficult. That case was As a result of the ruling, Steinberg will, presumably, close an ugly chapter in his life after 3 1/2 years.
“Based on legal developments subsequent to the defendant’s guilty plea, the government has concluded that further prosecution would not be in the interests of justice,” prosecutors wrote in memo to U.S. District Judge Richard Sullivan in Manhattan.
The appeals court ruling and the other six
In December, an appeals court ruling overturned the convictions of Todd Newman, formerly of Diamondback Capital Management, and Anthony Chiasson, co-founder of Level Global Investors having decided that the government had overreached.
“These prosecutions were all undertaken in good faith reliance on what this office and others, including able defense counsel for all those who plead guilty, understood to be the well-settled law before Newman,” federal prosecutor Preet Bharara said in the statement today.
The others who had their cases dropped were Spyridon “Sam” Adondakis, a Level Global Investors LP analyst who worked under Chiasson; Jon Horvath, who worked for Michael Steinberg at SAC; and Jesse Tortora, who assisted Newman at Diamondback Capital Management LLC.
Suffice is to say, it’s nothing less than very rare for charges to be dropped against those whom pleaded guilty and cooperated with prosecution. Indeed, one shrewd legal observer told ValueWalk:
It is very interesting that the US Attorney has claimed that these prosecutions were based on what he understood to be well-settled law before Newman. The fact is that the US Attorney charged this case knowing it could not prove all of the then well-known and universally accepted elements of insider trading, including the tippees knowledge of personal benefit, and knowing that all courts that had ever considered the issue interpreted the law the way the Second Circuit did.
Prior to the December ruling and today’s decision to drop charges, federal prosecutor Preet Bharara had successfully prosecuted over 80 people on insider trading charges in the last six years. The ruling, which may see even more convictions overturned,determined that in order to be prosecuted for insider trading, the defendant must know their tips were a result of a violation of secrecy and set a higher bar on determining what benefiting from trades entails. The ruling in favor of Michael Steinberg is a big loss for Bharara.
See legal documents regarding Michael Steinberg and others below.
Patrick Reynolds of Sard Verbinnen & Co sent the following statement to ValueWalk on behalf of Gregory Morvillo, Mr. Chiasson’s attorney
U.S. ATTORNEY COMMENTS ON INSIDER TRADING CHARGES DISMISSAL
STATEMENT OF U.S. ATTORNEY PREET BHARARA ON DISMISSAL OF CHARGES AGAINST MICHAEL STEINBERG AND SIX OTHER INSIDER TRADING DEFENDANTS
“Today, this Office will move to dismiss charges against Michael Steinberg, who was previously convicted at trial, and six cooperating witnesses who pled guilty, all in connection with the same insider trading scheme charged in United States v. Newman and Chiasson.
The decision to dismiss these charges follows the Second Circuit’s Newman decision, and also reflects determinations, after careful consideration of all of our prior insider trading prosecutions, that insisting on maintaining guilty pleas in these cases would not be in the interests of justice.
These prosecutions were all undertaken in good faith reliance on what this Office and others, including able defense counsel for all those who pled guilty, understood to be the well-settled law before Newman.”