Five SAC Traders Implicated In Insider Trading Case

Tyler Durden's picture

Two years ago nobody would dare touch Steve "Blue Eyes" Cohen's firm. Then we dared to ask some questions. Then the entire expert "information arbitrage" network pyramid got exposed (with a one year delay after ZH) and hedge funds returns aka "alpha" plunged. And now this. From Bloomberg:

  • FIVE SAC CAPITAL EMPLOYEES HAVE BEEN IMPLICATED IN INSIDER CASE
  • SAC MANAGER SAID TO BE UNCHARGED FIGURE IN HEDGE FUND SCHEME
  • SAC FUND MANAGER MICHAEL STEINBERG SAID TO BE TIED TO PROBE
  • SAC CAPITAL'S STEINBERG SAID TO BE UNINDICTED CO-CONSPIRATOR

How long until we go from unindicted, i.e. extensively questioned, to indicted? Or rather, just which bigger fish are these "unindicted co-conspirators" expected to throw under the bus? And what happens to the NYSE if/and or when the firm that trades 10% of its daily volume is busted?

From Bloomberg:

A hedge fund manager at Steven Cohen’s SAC Capital Advisors LP is an unindicted co-conspirator in a $62 million insider trading scheme tied to technology stocks, two people familiar with the matter said.

 

The role allegedly played by Michael Steinberg emerged in court papers filed by the U.S. in the securities-fraud case of Jon Horvath, a former technology analyst at Cohen’s $14 billion hedge fund who Steinberg supervised. Steinberg, who hasn’t been charged with a crime, is the fifth person to be tied to insider trading while employed at SAC.

 

Horvath faces trial Oct. 29 in Manhattan federal court along with two other portfolio managers for his part in what Manhattan U.S. Attorney Preet Bharara called a “criminal club:” a conspiracy of hedge fund managers, co-workers and company insiders who reaped millions of dollars on illegal tips about Dell Inc. and Nvidia Corp.

 

“The government added four additional co-conspirators,”

 

prosecutors wrote in a Sept. 6 letter filed with the court, with the names blacked out. One of them, the U.S. said, is “the portfolio manager to whom Jon Horvath reported at his hedge fund.” That person was Steinberg, said the people, who declined to be identified because the matter isn’t public.

 

Steinberg, 40, of SAC’s Sigma Capital Management unit, has worked at the hedge fund since 1997. He and his lawyer, Barry Berke, didn’t return calls or e-mails seeking comment on the letter.

 

Jonathan Gasthalter, a spokesman for Stamford, Connecticut- based SAC, and Ellen Davis, a spokeswoman for Bharara, declined to comment on the court filing.

 

Level Global

 

Horvath, and his co-defendants, Level Global Investors LP co-founder Anthony Chiasson and ex-Diamondback Capital Management LLC portfolio manager Todd Newman, are accused of participating in a conspiracy with other portfolio managers, analysts and insiders at technology firms who swapped tips between 2007 and 2009.

 

The three men were first charged by Bharara’s office in January. Five people who were part of the alleged insider- trading ring have pleaded guilty and are cooperating with the government.

 

The government filed a revised indictment against Horvath, Chiasson and Newman on Aug. 28, adding an additional securities fraud count against all three men for alleged insider-trading involving Santa Clara, California-based Nvidia.