NEW YORK (CNNMoney) — A high-ranking trader at SAC Capital -- the embattled hedge fund run by billionaire Steven Cohen that is at the center of a federal investigation into insider trading -- was charged with securities fraud Friday, according to federal authorities.
Michael Steinberg, a portfolio manager at SAC Capital, was charged with five counts, including securities fraud and conspiracy to commit securities fraud, for allegedly short-selling computer stocks Dell and Nvidia based on inside information, according to documents from the U.S. Attorney's office.
"Mr. Steinberg was at the center of an elite criminal club, where cheating and corruption were rewarded," said FBI Assistant Director George Venizelos, in a prepared statement.
Steinberg was arrested at 6 a.m. ET at his Manhattan residence, according to an FBI spokesman.
"Michael Steinberg did absolutely nothing wrong," his lawyer, Barry Berke, said in an e-mail to CNNMoney. "At all times, his trading decisions were based on detailed analysis as well as information that 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," Berke added.
The charges of securities fraud follow on the heels of a settlement, reached earlier this month, between SAC Capital and the Securities and Exchange Commission, the largest settlement in SEC history.
On March 15, two units of hedge fund SAC Capital agreed to pay $614 million to the SEC to settle charges of insider trading. The settlement included hedge fund advisory firm CR Intrinsic Investors, which agreed to pay about $600 million in fines for making $275 million in "illegal profit or avoided losses" from insider trading related to Irish biotech Elan.
It also included Sigma Capital, which agreed to pay $14 million for trading "based on nonpublic information" on financial results of Dell and Nvidia.
The SEC said that Steinberg worked at Sigma, where he allegedly received "illegal tips" from analyst Jon Horvath, who was named by the U.S. Attorney as a co-conspirator. The SEC said that Steinberg's "illegal conduct" netted him more than $6 million in profits and avoided losses.
When the settlement was announced, the SEC said that it might still be investigating people at the firm.
Cohen, the founder of SAC Capital, has not been charged, though federal investigators have been circling him for months, sniffing around for signs of insider trading and making peripheral strikes on his employees.
Last November, Preet Bharara, the U.S. Attorney for the Southern District of New York, charged Mathew Martoma, portfolio manager of CR Intrinsic Investors, with selling and short-selling shares of Elan and Pfizer subsidiary Wyeth.
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