THE HUMAN COST OF PREET’S FURY
ON Saturday afternoon, Preet Bharara, the US attorney for the Southern District of New York and the most celebrated federal prosecutor since Rudolph Giuliani held the same post three decades earlier, was fired by President Trump.
Some 48 hours later, Michael Steinberg, a former top trader with Steven Cohen’s hedge fund, then known as SAC Capital Advisors, is ready to disclose his next act: an early-stage venture capital fund called Reciprocal Ventures, which will focus on fintech (i.e., financial technology) startups. The coincidence is almost too perfect.
In 2013, the US attorney’s office charged Steinberg with insider trading, one of several indictments that were aimed at bringing down Cohen, who was Bharara’s Great White Whale. The next year, Steinberg was convicted and sentenced to three years in prison by Federal District Court Judge Robert Sullivan, who, at the sentencing hearing, nonetheless described Steinberg, then 42, as “a good man.”
In October 2015, however, Bharara was forced to drop the charges against Steinberg after the US Court of Appeals for the Second Circuit reversed the conviction of two Newman convicted,tially otherthe and same before hedge-fundAnthonyset the of same Chiasson,facts. managers,judge, The whoon appeals essen-Todd were courthad stretchedruled that the both insider-tradingSullivan and laws Bharara beyond which recognition,the hedge-fund and managersthat the means received by market-sensitiveamount to insider informationtrading. Subsequently,did not Bharara reversed the conviction of Steinberg and dropped the guilty pleas of six cooperating witnesses.
It’s worth noting as Bharara leaves office that his desire to nail Cohen — whom he was never able to indict — caused him to overreach, shutting down firms (though not Cohen’s, which is now called Point 72 Asset Management), throwing innocent people out of work and harming individuals like Steinberg, who simply wasn’t guilty of insider trading as the law defines that crime.
It’s also worth noting that Bharara’s office also didn't indict a single top Wall Street executive in the wake of the financial crisis.
On the plus side, he did a magnificent job prosecuting a genuinely criminal insider- tradingthe and ruptthis tigatinglikely peciallyIn hedge-fundweekend,he the politicians.to also ring,see by aftermathTrumpthe him did the he anti-Trumpsters,when showeredfine managerimpliedone Indeed,of work Bharara’sthathe was thatin in centeredRaj rooting encomiums,anotherfired.he firing, Rajaratnam,but was out remem- aroundyou’reinves- tweet cor- esber,tor whohis I recordis There suppose,a candidateis are mixed. thosethat for Rare Steinbergwho sainthood.is wouldthe prosecu-was argue, no sainthis former either; underlingsduring his testifiedtrial, one thatof he mation wanted that “edgy,we can proprietarymake money infor- in these stocks.” But I find the Second Circuit’s forceful rebuke of the government’s case persuasive, and in any case, with Bharara fired, with Cohen preparing to open his hedge fund to outside money — he’ll be able to do so in 2018 - and with Steinberg about to so in 2018 — and with Steinberg about to pear everyone is moving on. Steinberg certainly is. When I met up with him a few weeks ago, he told me that he had a partner, Josh Kuzon, the former seniorBank,into fundraising,the deal prisingly,wanted Inevitably,fundthe with and paymentsto firm.willit the was talk wasn’tI the start AlthoughUS asked about about. word strategist attorney’swith something Steinbergto “It on bring aroundhe was the wouldn’tat office. hard,”a Siliconhe street aboutthird$60 especiallyNot million.he discusspersonhis is Valley said.sur- thator“It madedren, them was whatandit hard gut-wrenching.”he was felt was goingit that was on: he important“ThatOne has small thingthey to knew chil-thattell we in.” were standing up for what we believed managers Another are difficultyused to is being that in hedge-fundcontrol of their own fate, and that is precisely what is taken away when you are under investigation or indictment. Before I left, I asked Steinberg if he still spoke with Cohen, who paid his legal bills. He smiled wanly and let out a small sigh. "Steve and I stay in touch, "is all he would “Steve and I stay in touch,” is all he would With Reciprocal Ventures, Michael Steinberg is moving on.