Eduardo Munoz/ReutersMichael Steinberg arrives at Federal Court in Manhattan on Friday. A federal judge on Friday sentenced Michael Steinberg, one of the longest tenured traders to work for the billionaire investor Steven A. Cohen, to three and a half years in prison for his conviction on insider trading charges last year. He also ordered him to pay a $2 million fine.
Federal District Judge Richard J. Sullivan in Manhattan agreed to allow Mr. Steinberg, 42, to remain free pending the outcome of an appeal, which his lawyers are expected to file soon.
Related LinksProsecutors working for Preet Bharara, the United States attorney in Manhattan, had asked the judge to impose a prison sentence of five years, three months to as much as six and a half years. Lawyers for Mr. Steinberg, who is married and has two children, had asked Judge Sullivan to sentence him to two years.
The probation department for the court recommended a sentence of four years, three months to five years, three months.
Judge Sullivan called Mr. Steinberg a "good man" and told him "this doesn't define you." But he said the sentence was warranted to send a message to others and because his actions involved "systematic trades over months and years."
In December, a federal jury in Manhattan convicted Mr. Steinberg, once a top portfolio manager, of generating $1.8 million in illegal trading profits for Mr. Cohen's SAC Capital Advisors, now called Point72 Asset Management. Soon before the jury announced its verdict, Mr. Steinberg briefly fainted, but on Friday he stood calmly. Mr. Steinberg declined an opportunity to speak on the advice of his lawyer, Barry Berke.
Mr. Steinberg is one of eight people who once worked for Mr. Cohen to either plead guilty to or be convicted of insider trading. SAC itself pleaded guilty to insider trading charges and paid a $1.2 billion penalty to federal prosecutors. Mr. Cohen has not been criminally charged, but the Securities and Exchange Commission has a pending administrative failure to supervise action against him. He officially renamed his firm just days before another federal judge accepted SAC's guilty plea.
Justin Lane/European Pressphoto AgencyEight people who once worked for Steven A. Cohen have either plead guilty to or been convicted of insider trading. Mr. Cohen's new firm is structured as a family office, managing $9 billion to $10 billion of his personal fortune.
On appeal, Mr. Steinberg's lawyers are expected to raise a legal challenge similar to one that seemed to receive a favorable hearing last month from a three-judge appellate panel.
During a contentious oral argument, the panel signaled that it had serious issues with the jury instructions given by Judge Sullivan in a related insider trading prosecution involving Todd Newman and Anthony Chiasson. The two men were portfolio managers at other hedge funds but traded on some of the same inside tips as Mr. Steinberg. The appellate panel appeared to side with the defense lawyers for Mr. Newman and Mr. Chiasson, who argued that Judge Sullivan erred when he failed to instruct the jury that it had to find whether traders knew the person providing inside information had received some sort of a benefit.
A decision is still pending in that appeal.
This post has been revised to reflect the following correction:
Correction: May 16, 2014
An earlier version of this article misstated the age of Michael Steinberg, the former SAC Capital Advisors trader who was sentenced to three and a half years in prison for his conviction on insider trading charges. He is 42, not 41.
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