NEW YORK (Reuters) -- Michael Steinberg, a portfolio manager at Steven A. Cohen's SAC Capital Advisors hedge fund, was sentenced Friday to three and a half years in prison for insider trading.

The sentence was imposed by U.S. District Judge Richard Sullivan in Manhattan, five months after a federal jury convicted Steinberg on securities fraud and conspiracy charges, in a case stemming from a broad crackdown on insider trading on Wall Street.

Steinberg's lawyers had asked for no more than two years in prison, while prosecutors had argued for up to 6-1/2 years.

Sullivan also ordered Steinberg to pay a $2 million fine and forfeit $365,142, a sum the government says Steinberg and an SAC analyst were paid from the illegal trading profits.

Dozens of family members and friends attended the sentencing and sent letters to the judge. The letters, Sullivan said, described Steinberg in a positive light that set him apart from other defendants he had sentenced.

"If it were only based on the character of this man, it would be easy, because I do think this is a good man," he said. "But I do have to consider the crime here."

Prosecutors accused Steinberg of trading on illegal tips about Dell Inc. and Nvidia Corp. passed to him by an SAC analyst, who admitted to swapping confidential information among a group of analysts at other hedge funds. Steinberg's trading resulted in illegal profits of $1.82 million, prosecutors said.

Steinberg, 42, is one of eight current or former SAC Capital employees to be convicted on insider trading charges.

SAC pleaded guilty to fraud charges and has agreed to pay $1.8 billion in criminal and civil settlements.

The Stamford, Connecticut-based firm has rebranded itself Point72 Asset Management as it shifts to being a family office managing Cohen's fortune.

Sullivan granted Steinberg bail, pending an appeal.

The appeal is expected to focus on Sullivan's not having required the government to prove that Steinberg knew the insider who originally disclosed non-public information had received a benefit for making the disclosure.

Todd Newman, a former portfolio manager at Diamondback Capital Management, and Anthony Chiasson, co-founder of Level Global Investors, are appealing on similar grounds stemming from convictions in a separate trial Sullivan also oversaw.

During appellate arguments in Newman and Chiasson's case last month, some judges questioned whether Sullivan's interpretation of the insider trading law was correct.

Sullivan on Friday noted the arguments, saying the issue appeared to be "a closer call than I thought."

Steinberg's sentence was less severe than those of Newman and Chiasson, who in 2013 received terms from Sullivan of four and half and six and half years in prison, respectively.

Cohen has not been criminally charged. The U.S. Securities and Exchange Commission is seeking to bar Cohen from the securities industry for failing to supervise Steinberg and another portfolio manager and prevent insider trading. Cohen denies wrongdoing.

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

(Reporting by Nate Raymond in New York, additional reporting by Jonathan Stempel and Joseph Ax, Editing by Franklin Paul and Gunna Dickson)

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