SAC Capital Advisors, the well-known hedge fund owned by billionaire stock superstar Steven Cohen, has taken a blow as Michael Steinberg has now been nailed for insider trading. Steinberg, charged with five counts of insider trading, was convicted Wednesday in a federal trial regarding privileged information, securities fraud, and conspiracy.
It appears that the shiny exterior which once adorned the perceived image of Cohen’s firm is being chipped away at as federal authorities boldly moved forward and gain a conviction against top fund manager Michael Steinberg on four counts of securities fraud and one count of conspiracy to commit securities fraud.
Steinberg, reflecting the gravity of the situation, fainted in court as the judge summoned the jury into the courtroom.
This conviction appears to be just the latest manifestation of regulator’s long investigative interest in SAC. For some time now authorities have suspiciously viewed Cohen’s famous firm, however no charges had been previously pursued against Cohen or individuals connected with the firm. The latest conviction of SAC’s Steinberg may represent a more aggressive position to be taken by regulators and federal authorities in attempts to take action on long held suspicions.
The verdict against SAC’s Steinberg was no guarantee. The evidence used in the case was relatively weak compared to past cases, and it largely relied on circumstantial evidence. Surprisingly however, there was an unexpectedly short deliberation time for the jury which then returned a guilty verdict for five counts of securities fraud related charges against the former top SAC man.
The case and conviction of SAC’s Steinberg highlights a news breakthrough for the U.S. government which has been on a path to control or at least curb the free-wheeling way of Wall Street. Cohen’s SAC until now has not been moved against, despite the aggressive stance taken since 2009 by the United States attorney’s office in Manhattan. The attorney’s office, which has a perfect 76 for 76 record, has been relentlessly pursuing such cases for almost five years, and the latest victory against SAC is a landmark win.
It does appear that the real target of the long time probe into the activities of SAC is in fact its main man Steven Cohen. Cohen feels as though the investigation and cases against his firm represent an unfair targeting of SAC and its employees. There is little reason to think however that Cohen’s feelings will influence the stance of the U.S. attorney’s office or regulators who have been eyeing and investigating his firm for nearly a decade.
Other SAC employees who have been charged with similar accusations have decided to comply with authorities, and with the recent conviction gained against Steinberg, authorities may be emboldened to push harder in their efforts to uncover wrongdoing at SAC.
Another notable SAC man has also been charged with insider trading recently. Mathew Martimo, who has pled not guilty to charges leveled against him, will stand trial come January of 2014. Martimo’s charges, related to privileged drug-trial information, contained the hopes of regulators who thought the charges would present an avenue to finally charge SAC’s head man Cohen himself, who looks more and more like the target of the federal actions. Without cooperation from Martimo however, the hopes of authorities to be able to charge Cohen could grow dim. At present, Martimo has expressed no intention to cooperate with authorities and awaits his January trial date.
Although the authorities appear to have their sights set high on Mr. Cohen himself, as of now SAC’s Steinberg has been nailed for insider trading, and is the first big casualty caused by regulators to the once envied Wall Street hedge fund.
By Daniel Worku