Michael Steinhardt censured over trades


Hedge fund "legend" Michael Steinhardt is no stranger to regulatory controversy.

Recall that in the early 1990s he and his firm were investigated for attempting to manipulate the short-term Treasuries market. Back then, he and his firm paid a $70 million fine as part of settlement with SEC and the U.S. attorney. Steinhardt later said the settlement was a way to move on. He's how back in hot water again.

Forbes reports that a Delaware Chancery Court judge has sanctioned him for "improper trading in a ruling that says Steinhardt wrongfully traded after receiving non-public information while serving as a plaintiff in a securities lawsuit."

The judge has directed Steinhardt to self-report his insider trading to the SEC and disgorge profits of $534,071. The trading gain stemmed from Steinhardt's shorting of Calix, which purchase Occam Networks in 2010. Steinhardt was a big investor in the latter, and went to court to block the deal, arguing that it did not fairly value the target. The judge has apparently concluded that Steinhardt used his knowledge of confidential information that was disclosed via discovery to make the trades.

Steinhardt's lawyers have argued that he did nothing wrong and that his trades were not based on any information gleaned from the discovery process. We'll see what the SEC does with the self-reported information.

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