After Michael Steinberg, Where Does the SAC Trail Lead?

Michael Steinberg seems like a good father. The portfolio manager for SAC Capital’s Sigma unit, who was charged with insider trading on March 29, was so concerned about being arrested in front of his two young children that he started staying in hotels several weeks ago in the hopes that he would be picked up there, according to a person familiar with the multi-agency investigation currently under way into illegal trading on Wall Street. Still, it’s difficult to outsmart the government: Agents escorted Steinberg out of his $8 million Park Avenue apartment in handcuffs, on Good Friday, at the FBI witching hour of 6 a.m., right after he returned from a vacation with his family in Florida, where his wife and kids had stayed behind. Steinberg had hoped to turn himself in, according to the person familiar with the investigation, but the FBI stopped allowing defendants to do that because it seemed unfair to let wealthy Wall Street traders be brought into custody with dignity while others aren’t afforded the opportunity. Later in the day, both the Securities and Exchange Commission and prosecutors for the Southern District of New York charged Steinberg with insider trading in two technology stocks, Dell and Nvidia, in 2008, 2009, and 2010.

The most pressing question now is what this means for SAC founder Steven Cohen, who has long been seen as the ultimate person of interest in the investigation. The charges against Steinberg, who has been on paid leave from SAC since his name first emerged in connection with the investigation in September, represent the deepest government prosecutors have reached into Cohen’s hedge fund firm as part of their six-year campaign to root out illegal trading at the fund. The charges against Steinberg also increase pressure on Cohen himself, as there will now be incentive for Steinberg to cooperate with the government’s investigation. Cohen has not been charged with any wrongdoing, and SAC issued a statement in support of Steinberg: “Mike has conducted himself professionally and ethically during his long tenure at the firm. We believe him to be a man of integrity.”