UPDATE 2-Level Global's Chiasson sentenced to 6-1/2 years prison

Mon May 13, 2013 2:28pm EDT

* Government: Firm made over $68 million of illegal profits

* Judge balances Chiasson's community work with crime

By Bernard Vaughan

NEW YORK, May 13 (Reuters) - Former Level Global Investors LP fund manager Anthony Chiasson on Monday was sentenced to 6-1/2 years in prison for insider trading, a penalty that the judge in the case said was intended to deter others in the financial industry from similar conduct.

U.S. District Judge Richard Sullivan also ordered the former hedge fund manager to pay a $5 million fine.

Sullivan said that Chiasson, who is married with two young children, was "a good man, a decent man," but he cited deterrence as a reason to send him to prison.

"This is conduct that has to be punished," Sullivan said.

Chiasson did not make any statements to the judge during the proceedings and chewed gum throughout. While the judge said Chiasson, 39, carried himself with dignity throughout the trial and sentencing, he expressed annoyance over Chiasson's gum chewing in the courtroom.

Chiasson's lawyer, Gregory Morvillo, said he intends to appeal the conviction. Sullivan denied bail pending appeal and ordered Chiasson to surrender in 90 days.

Chiasson and Todd Newman, a former portfolio manager with the now-defunct hedge fund Diamondback Capital Management, were convicted in December of conspiracy to commit securities fraud and securities fraud.

The two used inside information to trade in shares of computer maker Dell Inc and chipmaker Nvidia Corp . Level Global made more than $68 million in illegal profits from the trades, according to prosecutors.

Sullivan sentenced Newman to 4-1/2 years in prison earlier this month. Federal prosecutors had requested that Chiasson serve as many as 10 years in prison.

Level Global closed in 2011 following an FBI raid and has been winding down its operations. Last month, the firm agreed to pay $21.5 million to settle civil charges brought by the U.S. Securities and Exchange Commission related to Chiasson's conduct.

Chiasson and David Ganek launched Level Global in 2003 after leaving Steven A. Cohen's $15 billion hedge fund, SAC Capital Advisors. Ganek has not been charged with wrongdoing.

Nine current or former SAC Capital employees have been charged or implicated in the government's investigation of insider trading, though neither the firm nor Cohen has faced criminal charges. In April, SAC Capital agreed to pay $616 million to settle an SEC civil complaint.

Chiasson is the 49th person to be sentenced since August 2009 in the government's sweeping insider-trading investigation. A total of 73 people have been convicted, according to the Manhattan U.S. Attorney's Office.

Morvillo pointed to Chiasson's charitable works in requesting leniency. Chiasson started a scholarship fund for financially disadvantaged students in his home state of Maine, served on the board of trustees for his high school and college, and donated millions to charities, according to his sentencing memorandum.

Sullivan reserved judgment on how much he will order Chiasson to forfeit, though he said it would not be more than $2 million.

The case is U.S. v. Chiasson, U.S. District Court, Southern District of New York, No. 12-cr-00121.