Former SAC Capital Advisors LP portfolio manager Mathew Martoma was charged in what U.S. prosecutors called 'the most lucrative insider-trading scheme ever', netting as much as $276m while at the hedge fund.
Bloomberg reports that prosecutors in the office of U.S. Attorney Preet Bharara in Manhattan Tuesday unsealed a complaint charging Martoma with trading on illicit tips about Alzheimer’s disease drug-trial results from 2006 to 2008.
Martoma is accused of arranging trades in shares of Wyeth LLC and Elan Corp., making $220m in profits and avoiding $56m in losses for an unnamed hedge fund. Martoma is charged with one count of conspiracy and two counts of securities fraud.
Martoma, 38, of Boca Raton, Florida, worked for CR Intrinsic Investors in Stamford, Connecticut, a unit of SAC Capital, according to a civil complaint lawsuit filed against him by the U.S. Securities and Exchange Commission. Martoma allegedly engaged in the misconduct while at CR Intrinsic, according to the SEC complaint.
The SEC sued Martoma, CR Intrinsic and Dr. Sidney Gilman, the neurologist who allegedly supplied the tips.
Manhattan U.S. Attorney Preet Bharara said: 'Today yet another privileged hedge fund professional stands accused of insider trading. The charges unsealed today describe cheating coming and going – specifically, insider trading first on the long side, and then on the short side, on a scale that has no historical precedent.
'As alleged, by cultivating and corrupting a doctor with access to secret drug data, Mathew Martoma and his hedge fund benefited from what might be the most lucrative inside tip of all time. As Martoma allegedly got sneak peeks at drug data, he first recommended that the hedge fund build up a massive position in Elan and Wyeth stock, and then caused the fund to shed those shares after getting a secret look at the unexpectedly bad results of a clinical drug trial.
'And so, overnight, Martoma went from bull to bear. As a result of the blatant corruption of both the drug research and securities markets alleged, the hedge fund made profits and avoided losses of a staggering $276m, and Martoma himself walked away with a $9m bonus for his efforts. The SEC and FBI deserve particular praise for uncovering the facts leading to today's charges'.
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Here's the SEC press release: