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Former SAC Employee Steinberg Guilty of Fraud, Founder Cohen May Be Next

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The charges against Steinberg stemmed from insider trading on Dell and Nvidia stock
The charges against Steinberg stemmed from insider trading on Dell and Nvidia stock
After deliberating for two days, a nine person jury found Michael Steinberg guilty of all counts of securities fraud which stemmed from trading on insider information in Dell and Nvidia stock on Wednesday, December 18. The verdict stems from a case a case that was the first to result from the government’s focus on insider trading at SAC Capital Advisors.

The Stamford, Conn. Based company was founded by billionaire businessman Steven A. Cohen, who hasn’t been charged criminally but is facing civil suits, the Associated Press reported. This month, however, the company agreed to pay a record $1.8 billion to settle civil and criminal insider trading charges.

U.S. District Judge Richard J. Sullivan set sentencing for April 25 and Steinberg faces up to 25 years in prison.

According to the AP, Judge Sullivan told jurors that Steinberg, 41, had a “bit of a dizzy spell” as he had appeared to faint when the jury entered the courtroom to announce the verdict. Judge Sullivan reportedly told the jurors that Steinberg had been checked by a nurse and Steinberg’s brother, who is a doctor, both agreed he was fit to receive the verdict. When the first of five guilty verdicts was read aloud, Steinberg’s head dropped back and he looked up.

According to Forbes, Steinberg is the first SAC Capital employee to go to trial, and the last of 77 people convicted for insider trading under U.S. Attorney Preet Bharara watch. Bharara reportedly said of the verdict “like many other traders before him who, blinded by profits, lost their sense of right and wrong, Steinberg now stands convicted of federal crimes and faces the prospect of losing his liberty.”

Steinberg’s guilty verdict on five charges of securities fraud came after a former subordinate, Jon Horvath, testified against his former boss. According to Bloomberg News, Horvath said that his boss pressured him to get “edgy” and “proprietary” information and that he feared he would lose his job if he did not cooperate.

Steinberg is one of eight former SAC employees to be accused of securities fraud by the government, Forbes reported. Six other former employees pleaded guilty and agreed to cooperate with the government, including Jon Horvath who testified against Steinberg. Another trader, Mathew Martoma, also chose to take on Preet Bharara and is scheduled to go to trial in January.

According to Forbes, the guilty verdict against Steinberg leads many to believe that the founder and head of SAC, billionaire Steve Cohen, adds pressure to the legendary investor, who Bharara is reportedly still eyeing for a criminal case. A spokesperson for SAC Capital and Steve Cohen declined to comment.

Forbes explained: “Beyond prohibiting the massive hedge fund from managing outside money, essentially forcing it to close down and restructure itself into a family office that will presumably manage Steve Cohen’s $9.4 billion fortune, Bharara has now secured a conviction of a friend of Cohen who worked closely with the hedge fund billionaire. Given Bharara’s record, and the recent conviction, Martoma’s chances to prove he’s innocent of insider trading appear slim. And Cohen could be next.”

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