The insider trading case against a longtime SAC Capital Advisors trader
On Friday, authorities arrested and charged Michael Steinberg with criminal insider trading in shares of Dell and Nvidia. Steinberg has worked at SAC Capital for 16 years and is the ninth person connected with the firm whom officials have linked to such trading; four have pleaded guilty.
The government alleges that Steinberg received inside information about Dell and Nvidia from Jon Horvath, a former analyst at SAC who has admitted to insider trading.
According to the indictment, in August 2008, Horvath got confidential information about Dell's performance from Jesse Tortora, then an analyst at Diamondback Capital. Tortora had obtained it from Sandeep "Sandy" Goyal, then a tech stock analyst at Neuberger Berman. Goyal had worked at Dell for three years and maintained contacts with former colleagues, at least one of whom shared confidential details with him.
The indictment also says that in May 2009 an analyst at Whittier Trust Co. named Danny Kuo passed Nvidia confidential information to Tortora and Horvath, who gave it to Steinberg. Kuo allegedly had received it from someone at another tech company, who had received it from a person at Nvidia.
Notice something about both those claims? The chain is very long. From the prosecution's view, the ideal insider trading case has an actual insider engaged in trading. The next remove is having someone tipped by an insider engaging in trading. In the Dell-related charges, we have Steinberg tipped by someone who was tipped by someone who was tipped by someone who knew a company insider.
That's a lot of someones standing between Steinberg and the original breach of a legal duty of confidentiality.
If somewhere along the line the knowledge of the illicit and confidential nature of the information was rubbed away, the case could fall apart.