FBI busts portfolio manager at SAC Capital hedge fund

Steven Cohen
Steven Cohen

U.S. prosecutors on Friday charged Michael Steinberg, a veteran portfolio manager with Steven A. Cohen’s $15 billion hedge fund, with engaging in insider trading in two technology stocks, the most senior SAC Capital Advisors employee to be charged in the government’s long-running probe.

The five-count indictment was announced a few hours after Federal Bureau of Investigation agents arrived at Steinberg’s home in New York City at around 6 a.m. ET and arrested him.

Federal prosecutors are charging Steinberg, 40, with using inside information to make trades in shares of Dell and chipmaker Nvidia that generated about $1.4 million in illegal profits for Cohen’s hedge fund…

SAC Capital spokesman Jonathan Gasthalter said: “Mike has conducted himself professionally and ethically during his long tenure at the firm. We believe him to be a man of integrity…”

In a related civil complaint against Steinberg, the U.S. Securities and Exchange Commission said the information allowed Steinberg to generate $6.4 million in profits and avoided losses for Cohen’s hedge fund.

Steinberg is one of nine current or former employees of SAC Capital who have been charged or implicated with insider trading while working at Cohen’s 2-decade-old hedge fund…

The arrest comes two weeks after SAC agreed to pay a record $616 million to the SEC to settle civil charges of insider trading. SAC neither admitted nor denied wrongdoing at that time.

But the government made clear that that settlement did not preclude further charges.

The DOJ’s policy on Wall Street – in general – is to bust the little fish, negotiate a deal on jail time to get them to testify against the heavy hitters at the top of the pyramid. Then, they settle for a chunk of money from the firm’s coffers. Unfortunately, in an era of untouchable Wall Street bosses, that’s not sufficient to make any changes in behavior.

The name of the game is Never Steal Anything Small. When you have the top man at SAC spending over $100 million for a Picasso for his new $60 million beach cottage – he may whine over the fine; but, staying outside of the slammer is what really counts. He can always hustle more money.

Nvidia contractor charged with selling data to hedge funds

U.S. prosecutors in Manhattan filed new charges as part of a national probe of insider trading, accusing a California consultant for an expert-networking firm with selling inside information to two unidentified hedge funds.

Winifred Jiau, arrested in Fremont, was accused of selling data on Nvidia Corp. and Marvell Technology Group Ltd., makers of computer components, through the networking firm, according to a filing today in Manhattan federal court. The hedge funds paid her $200,000 through the firm, prosecutors alleged…

The evidence against Jiau is “strong,” Assistant U.S. Attorney Wilson Leung told the judge, adding that there is a “cooperating witness and audio recordings.” When asked by Vadas if she understood the charges, Jiau said “I not have a chance to know until now.” Barry Portman, her assigned public defender, said the complaint is a “lengthy document.” She didn’t enter a plea to the charges.

Her arrest follows charges earlier this month against three technology company workers who allegedly sold secrets about Apple Inc., Dell Inc. and Advanced Micro Devices Inc. The men, who worked at AMD, Flextronics International Ltd. and Taiwan Semiconductor Manufacturing Co., were arrested on securities fraud and conspiracy charges for a scheme that Manhattan U.S. Attorney Preet Bharara said operated from 2008 to early 2010.

Also arrested at the time was James Fleishman, a sales manager at Primary Global Research LLC, the expert-networking firm where the three worked as consultants. If convicted, all four face as long as 20 years in prison…

Santa Clara, California-based Marvell, which makes chips for the BlackBerry phone, declined to comment. Bob Sherbin, a spokesman for Nvidia, also based in Santa Clara, said Jiau was a contractor who left the company about a year ago…

It grows deeper and deeper.

If this keeps up, we may even experience a shock epidemic of honesty in business.