Tags: SAC | Capital | Martoma | Insider | Trading

SAC Capital's Martoma Gets 9 Year Sentence for Insider Trading

Monday, 08 September 2014 05:10 PM

Mathew Martoma, a former portfolio manager at billionaire Steven A. Cohen's SAC Capital Advisors LP hedge fund, was sentenced on Monday to nine years in prison for engaging in what authorities called the most lucrative insider trading scheme in U.S. history.

U.S. District Judge Paul Gardephe in New York also ordered Martoma, 40, to forfeit $9.3 million.

Prosecutors accused Martoma of making illegal trades in pharmaceutical stocks based on tips about a clinical trial for an Alzheimer's drug. They said those trades enabled SAC to generate about $275 million of illegal gains.

"There was nothing accidental about Mr. Martoma's conduct or the gain realized," Gardephe said. "I cannot and will not ignore that the gain is hundreds of millions of dollars more than ever seen in an insider trading prosecution."

A federal jury convicted Martoma, who worked in SAC's CR Intrinsic Investors unit, in February of securities fraud and conspiracy.

He had faced up to 20 years in prison under federal guidelines. Prosecutors sought a term longer than the eight years recommended by the court's probation department.

Martoma's lawyers have promised an appeal.

The nine-year sentence is among the longer prison terms in U.S. insider trading cases, reflecting a trend of increasingly lengthy sentences in recent years.

In 2012, corporate lawyer Matthew Kluger was sentenced in New Jersey to 12 years in prison for trading on information from law firms about mergers.

In 2011, Galleon Group hedge fund founder Raj Rajaratnam was sentenced in New York to 11 years in prison.

The case against Martoma stemmed from a broad investigation of insider trading at SAC.

Eight employees have been convicted or pleaded guilty and SAC last year agreed to pay $1.8 billion in criminal and civil settlements and plead guilty to fraud charges.

SAC recently changed its name to Point72 Asset Management, and the Stamford, Connecticut-firm was transformed into a family office managing Cohen's fortune.

Prosecutors said Martoma sought out confidential information from doctors involved in a clinical trial of an Alzheimer's drug being developed by Elan Corp, since acquired by Perrigo Co , and Wyeth, now a unit of Pfizer Inc.

Based on a tip Martoma received from Sidney Gilman, a former University of Michigan professor who chaired the drug's safety monitoring committee, SAC Capital in July 2008 began selling its $700 million position in Elan and Wyeth, prosecutors said.

They said most of the trading occurred in accounts controlled by Cohen, who had a 20-minute phone call with Martoma after receiving information about the negative results of the study.

Cohen has not been criminally charged.

He still faces a U.S. Securities and Exchange Commission civil action seeking to bar him from the financial services industry for failing to supervise Martoma and Michael Steinberg, an SAC portfolio manager convicted of insider trading in a separate trial in December. Cohen has denied wrongdoing.

The case is U.S. v. Martoma, U.S. District Court, Southern District of New York, 12-cr-00973.

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Mathew Martoma, a former portfolio manager at billionaire Steven A. Cohen's SAC Capital Advisors LP hedge fund, was sentenced on Monday to nine years in prison for engaging in what authorities called the most lucrative insider trading scheme in U.S. history.
SAC, Capital, Martoma, Insider, Trading
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2014-10-08
Monday, 08 September 2014 05:10 PM
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