A former SAC Capital Advisors portfolio manager pleaded not guilty on Friday to a five-count criminal indictment alleging that he engaged in insider trading on shares of two technology companies.
FBI agents arrested Michael Steinberg Friday morning following an investigation into insider trading, an FBI spokesman told CNBC.
The indictment accuses Steinberg of receiving the illegal information from his former associate Jon Horvath, who already pleaded guilty last year and is cooperating with investigators. Charges against Steinberg had been widely expected since Horvath's arrest.
The FBI alleges that Steinberg cultivated a network of sources of inside information, and traded on tips from them.
Barry Berke, attorney for Steinberg, told CNBC that the former SAC portfolio manager had done "absolutely nothing wrong".
"At all times, his trading decisions were based on detailed analysis as well as information he understood had been properly obtained through the types of channels that institutional investors rely upon on a daily basis. Caught in the crossfire of aggressive investigations of others, there is no basis for even the slightest blemish on his spotless reputation," he said in a statement.
A SAC Capital spokesperson said "Mike has conducted himself professionally and ethically during his long tenure at the firm. We believe him to be a man of integrity."
Manhattan U.S. Attorney Preet Bharara issued a statement saying that Steinberg "cultivated" insider information from other sources.
"As alleged, Michael Steinberg was another Wall Street insider who fed off a corrupt grapevine of proprietary and confidential information cultivated by other professionals who made their own rules to make money," the statement said. "With lightning speed in at least one case, Mr. Steinberg seized on the opportunity to cash in and tried to keep his crime quiet, as charged in the Indictment. As alleged, where once Mr. Steinberg answered only to his own rules, now he will have to answer to the rule of law, like so many others before him."
FBI Assistant Director George Venizelos characterized the research used by Steinberg as "nothing more than well-timed tips from an extensive network of well-sourced analysts."
"Mr. Steinberg was at the center of an elite criminal club, where cheating and corruption were rewarded," Venizelos said in a statement. "The law is clear for everyone including Mr. Steinberg. Trading on inside information is illegal. The FBI will continue to police our markets and arrest anyone who violates the law."
The FBI has undertaken a major campaign to uncover insider trading at hedge funds and expert networking firms. More than 70 arrests have taken place so far as a result of those investigations.
The arrest comes two weeks after SAC agreed to pay a record $616 million to the SEC to settle civil charges of insider trading. SAC neither admitted nor denied wrongdoing at that time.
But the government made clear that that settlement did not preclude further charges.
Reuters contributed to this report.