DIRTY POOL PLAYER

SEC’s Cohen tack

The Securities and Exchange Commission just can’t let go of Michael Steinberg.

The regulator said in court papers on Monday that it will try to use the former SAC Capital trader to prove its “failure to supervise” case against hedge fund billionaire Steve Cohen — even though Steinberg’s criminal insidertrading conviction was dismissed following a landmark appeals court ruling in a similar case.

While the SEC will no longer argue that Cohen, perhaps the most successful hedge fund trader ever, failed to supervise Steinberg, it still plans to offer evidence before one of its administrative judges concerning Cohen’s supervision of Steinberg to prove its case involving fellow SAC trader Mathew Martoma.

The move by the SEC was seen by some as a desperate attempt that may not have been allowed had the case been in front of a federal judge.

“The SEC is trying to get this evidence in through the back door,” said Sam Lieberman, a securities litigator with Sadis & Goldberg who has tangled with the SEC in its inhouse administrative court several times.

“It’s Kafkaesque,” he added. “They know they can’t prove the Steinberg allegations, but they are trying to win the Martoma allegations by trying to tar Cohen with the shadow of the Steinberg allegations.”

Such evidence likely wouldn’t make it into federal court, but the rules are more lax in an SEC administrative court, and that’s where the case is being heard, Lieberman said.

The SEC’s 2¹/₂yearold case against Cohen was put on hold while the criminal cases against Steinberg and Martoma went ahead.

Both Steinberg and Martoma were convicted of insider trading, but Steinberg’s case was dismissed after the Supreme Court refused to hear the government’s appeal of a similar case.

The Supreme Court refused to hear the government’s appeal, and Steinberg had all the charges against him dismissed.

Cohen was never charged criminally — despite a yearslong probe. The civil case against him is now going forward.

SAC Capital pleaded guilty to insider trading in 2013 and agreed to pay the feds a total of $1.8 billion and return investors’ money.

SAC was shut down. It is now a family office named Point72 Asset Management, managing Cohen’s $12 billion fortune.

The SEC case against him is the closest it has come to even trying to nail him. If convicted, Cohen could be barred from ever managing investor money again. But without Steinberg, it’s going to be harder for the SEC to win.

“It blows major bullet holes in the SEC’s case because suddenly it doesn’t look like a big pattern,” Lieberman said.

Cohen, in a statement, said Monday that he will contest the SEC’s effort to include the Steinberg evidence.