THE BURNED OVER DISTRICT

Not the boss yet, but one of his managers and longest tenured employees.

A SAC Capital Advisors portfolio manager was arrested by federal agents on Friday, becoming the most senior employee at the giant hedge fund ensnared in the government’s vast insider trading investigation.

Michael Steinberg, 40, was arrested at his Park Avenue apartment early Friday morning and taken out of his building in handcuffs. He has worked for SAC and its owner, the billionaire investor Steven A. Cohen, since 1997 and became one of the firm’s senior portfolio managers, focusing on technology stocks...

Mr. Steinberg is one of SAC’s longest-tenured employees. He joined SAC shortly after graduating from the University of Wisconsin when the fund was just Mr. Cohen and several dozen traders. For years, he sat near Mr. Cohen on the trading floor and the two grew close.

When Mr. Steinberg was married in 1999 at the Plaza Hotel, Mr. Cohen attended the black-tie affair. The two share the same hometown, Great Neck, N.Y., on Long Island, where they both attended Great Neck North High School...

Earlier this month, Mr. Cohen signed off on two settlements in which the firm agreed to pay federal securities regulators $616 million to resolve two insider trading cases against SAC. On Thursday morning, a federal judge refused to approve the larger of the two settlements, a $602 million pact, raising concerns over a provision that allows SAC to avoid admitting that it did anything wrong.

The smaller of the settlements, for about $14 million, related to trading by Mr. Steinberg and a fellow portfolio manager, Gabe Plotkin, according to people familiar with the case. Mr. Plotkin has not been charged with any wrongdoing.

Mr. Steinberg’s name first surfaced in the broader inquiry last September when a former SAC analyst who worked under him pleaded guilty to being part of an insider trading ring that illegally traded the technology stocks of Dell Inc. and Nvidia. As part of his guilty plea, the analyst, Jon Horvath, implicated Mr. Steinberg, saying that he gave the confidential information to his SAC boss and that they traded based on the secret financial data about those two companies.

All of this begs the question, why is Steven Cohen still at large? He took most of the credit and profit when things went well, how can he say he didn't know anything now?