Former SAC Capital manager Michael Steinberg was sentenced last Friday to two and one half years in jail and a $2 million fine for insider trading.
After several years of investigations and trials, Michael Steinberg has finally been sentenced for his role in illegal insider trading while serving as the Manager of Steven Cohen’s SAC Capital Advisors. Last Friday afederal judge in Manhattan, Richard Sullivan, sentenced Mr. Steinberg to three and one half years of jail time and a $2 million fine. Mr. Steinberg is lucky as prosecutors had asked for six and a half years of jail time.
In addition, Steinberg will also have to give up $365, 000 in profits that came from the illegal trading and serve three years of supervised probation when he gets out of prison.
Steinberg personally earned $1.8 million from his illegal trading on firms such as Dell And Nvidia.
Convicted last December, Steinberg is one of nine people who formerly worked at SAC to be found guilty or to have admitted to wrongdoing.
In issuing the sentence the judge said, “Most of the people who come before me are good. Your life takes it to a different category.” Steinberg’s crimes, were “systematic trades over months and years. For most people on the planet, $1.8 million is a lifetime of accumulated wealth.”
Judge Sullivan said that insider trading undermines the confidence that people have in the markets and that he wanted Steinberg to serve as an example.
But Sullivan may have given a lighter sentence than the prosecutor’s had asked for because of the 68 letters submitted to the court on Steinberg’s behalf which detailed his philanthropic works. The judge said he would recommend Steinberg serve his sentence at Otisville Correctional, a medium-security prison in Orange County, NY.
The jury deliberated for only a day and a half. One juror, Paul Skokandich, told the New York Post about Steinberg’s success, “It wasn’t just good research, because the numbers were too finite, too close. You can’t pull that information out. You’re not going to get that close to the published numbers.”
“Did this individual have information and do something to benefit from it?, ” was the question that Skokandich said the jurors asked themselves. “We all went into the trial with an open mind. You want to get all the details you can.”
Mr. Steinberg, however, remains free pending his appeal. His lawyers feel that they have a strong case for judicial error regarding the instructions that Judge Sullivan gave the jury. Last month a Federal Appeals court in New York seemed to agree that the instruction which Judge Sullivan gave in another case involving similar charges against other hedge fund managers were incorrect. They were the same as the instructions which the judge gave Steinberg’s jury.
Last November SAC Capital Advisors reached a plea deal with US Federal prosecutors in an insider trading case in which it pleaded guilty to securities fraud and wire fraud and took responsibility for the illicit activities of nine of its traders, including Steinberg. SAC Capital agreed to pay a fine of $900 million and give up another $900 million in ill gotten proceeds for a total penalty $1.8 billion.
The company was renamed Point72 Asset Management and handles $10 billion of Mr. Cohen’s money.
Steven Cohen has not himself been charged with any crimes related to the insider trading scandal.
Michael Steinberg, 38, began working at SAC in 1997. He joined the Sigma division in 2001.