A federal jury has convicted former SAC Capital portfolio manager Michael Steinberg for insider trading, conspiracy, and securities fraud. Prosecutors contend that he traded on confidential information that he received from another employee.
Steinberg is one of eight employees at the hedge fund’s Sigma Capital Management division charged with insider trading and the first to go to trial. Six of the others pleaded guilty, including SAC analyst Jon Horvath, who prosecutors said is the one that gave Steinberg the nonpublic information. Horvath, who turned witness for the prosecution, has admitted to exchanging illegal tips with people at different firms. He said that Steinberg pressured him to provide “proprietary” information about technology stocks.
Steinberg is accused of making a number of trades, including ones before Dell’s earnings report in August 2008 went out. He reportedly netted $1 million in trades from this after he started shorting the computer company’s stock following a tip that Dell’s gross margins would fall short of Wall Street’s expectations. Similar tips that Steinberg received about Nvidia reportedly netted the hedge fund over $400,000.
Steinberg’s conviction comes just one month after SAC Capital Advisors, which Steven A. Cohen owns, pleaded guilty to securities fraud and wire fraud related to insider trading in criminal court. The hedge fund will pay at least $1.2 billion in fines and is being converted into an office that will just manage about $9 billion of Cohen’s own fortune. Although Cohen has not been criminally charged, the Securities and Exchange Commission did file a securities case accusing him of failing to reasonably supervise employees.
Still waiting for his trial is Mathew Martoma, the seventh SAC employee accused of insider trading. Last week, a federal judge turned down the ex- SAC Capital Advisors LP portfolio manager’s request for the dismissal of some of the insider trading charges against him.
Some of his trades were allegedly made in American depository receipts of Elan Corp. ELN.I, which is an Irish drugmaker. While Martoma argued that US securities law did not cover these transactions, U.S. District Judge Paul Gardephe said that they did. Gardephe, therefore, did not toss out one of the two securities charges against him, as well as a conspiracy count.
Prosecutors claim that Martoma played a role in SAC affiliate CR Intrinsic Investors avoiding $276 million in losses five years ago by recommending that it sell Wyeth and Elan shares. The recommendation purportedly came from tips regarding the poor trial outcomes for a diabetes drug.
If you are an investor that suspects your losses are due to insider trading, please contact Shepherd Smith Edwards and Kantas, LTD LLP today. Our insider trading fraud lawyers represent investors throughout the US.
Ex-SAC trader is convicted of insider trading, NY Times, December 18, 2013
Ex-SAC manager Martoma fails to end part of insider case, Reuters, December 17, 2013
More Blog Posts:
SAC Capital Advisors to Pay $1.2B Penalty, Pleads Guilty to Insider Trading Violations, Stockbroker Fraud Blog, November 4, 2013
SAC Capital Advisors LP Expected to Plead Guilty to Insider Trading Criminal Charges, Institutional Investor Securities Blog, October 31, 2013
SEC Charges SAC Capital Hedge Fund Adviser Stephen Cohen With Failure to Stop Insider Trading, Institutional Investor Securities Blog, July 20, 2013