The Morning Brief: SEC Inches Closer to SAC Capital’s Steve Cohen

On Good Friday, Michael Steinberg, a former portfolio manager at Steven Cohen’s SAC Capital Advisors unit Sigma Capital Management, was arrested on conspiracy and securities fraud charges for his role in the government’s ever-widening insider trading investigation. Steinberg, perhaps the highest executive at SAC to be charged, was accused of trading on material, nonpublic information related to computer maker Dell and technology company Nvidia provided to him by analyst John Horvath, who previously pled guilty to securities fraud charges, according to Preet Bharara, United States Attorney for the Southern District of New York. Horvath allegedly received his information from several analysts at several different investment firms, all of whom have also pled guilty for their roles in the scheme. These include Jesse Tortora, formerly at Diamondback; Spyridon Adondakis, a former research analyst at Level Global; Danny Kuo, a former research analyst and fund manager at Whittier Trust; and Sandeep Goyal, a former research analyst of Neuberger Berman. Cohen himself has not been charged of wrongdoing. According to the government, Steinberg’s trading in Dell and Nvidia earned $1.4 million in illegal profits for an unnamed hedge fund.

Separately, the Securities and Exchange Commission charged Michael Steinberg with trading on inside information before Dell and Nvidia reported quarterly results, enabling hedge funds managed by Sigma Capital and SAC Capital to generate more than $6 million in profits and avoided losses. “Steinberg essentially got an advance copy of Dell and Nvidia’s quarterly earnings announcements, allowing him to trade on tomorrow’s news today,” said George Canellos, acting director of the SEC’s enforcement group.