Charges Against Former SAC Trader Dropped In Wake Of Newman

Last Thursday the anticipated fallout from the United States Supreme Court’s recent refusal to review the Second Circuit’s game-changing Newman decision began, with U.S. Attorney Preet Bharara dropping insider trading charges against former SAC Capital Advisors LP portfolio manager Michael Steinberg and six cooperating witnesses who had already entered pleas of guilty. 

The announcement signaled a significant setback for Bharara who, prior to the Newman ruling, had amassed dozens of insider trading convictions – with Steinberg’s SAC Capital firm being among the central government targets.  SAC had been one of the country’s largest hedge funds, and while its founder, Steven A. Cohen, was never charged with a crime, the firm pled guilty to insider trading charges in 2013, agreed to pay a fine in excess of $1.8 billion, and closed its doors to outside investors.

Steinberg had originally been sentenced to three and a half years in prison, but his conviction was thrown in doubt after the Second Circuit’s December, 2014 Newman ruling, which held that prosecutors have to prove that an individual charged with insider trading knew both that an insider had turned over confidential information and that the insider had received some sort of benefit as a result.  Earlier this month, the U.S. Supreme Court denied the government’s petition for writ of certiorari in Newman, thereby ending the government’s challenge to the Second Circuit’s decision, and pushing Bharara closer to Thursday’s decision. 

At his press conference on Thursday, Bharara said that “insisting on maintaining guilty pleas in these cases would not be in the interests of justice.”