Former SAC trader is found guilty of insider trading

Former SAC portfolio manager Mathew Martoma, with his wife, Rosemary, faces a seven- to 10-year prison sentence.
Eduardo Munoz/Reuters
Former SAC portfolio manager Mathew Martoma, with his wife, Rosemary, faces a seven- to 10-year prison sentence.

NEW YORK — A federal jury in Manhattan on Thursday convicted Mathew Martoma on insider trading charges in what may be the last criminal case to emerge from a decade-long investigation of Steven A. Cohen and his SAC Capital Advisors hedge fund.

The jury of seven women and five men found Martoma, a former SAC portfolio manager, guilty of seeking out confidential information related to a clinical trial for an experimental Alzheimer’s drug. The inside information — provided mainly by a doctor familiar with the results of the clinical trial who was the government’s main witness — helped SAC avoid losses and generate profits totaling $275 million in July 2008.

The 39-year-old former trader, who is married and has three young children, is expected to face a prison sentence of seven to 10 years.


The guilty verdict is the latest setback for Cohen and his 22-year-old firm, which itself pleaded guilty to securities fraud charges in November and agreed to pay a $1.2 billion penalty. Cohen, 57, has not been charged with any criminal wrongdoing. The verdict comes as Cohen is moving forward with plans to reconfigure his firm into a family office that will mainly manage his $9 billion in personal wealth.

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Martoma is the eighth person who once worked for Cohen to either be convicted at trial or plead guilty to insider trading, a record that led prosecutors to call SAC a “veritable magnet for market cheaters” when they indicted the hedge fund, which at one time managed $14 billion, on securities fraud charges in July.

Richard Strassberg, a lawyer for Martoma, said, “We’re very disappointed and we plan to appeal.”

Preet Bharara, the US attorney in Manhattan, said after the conviction that “cheating may have been profitable for Martoma, but in the end, it made him a convicted felon, and likely will result in the forfeiture of his illegal windfall and the loss of his liberty.”

The jury reached a verdict after a little more than two days of deliberation. Martoma was stone-faced as the verdict was read. His wife, Rosemary, cried with her hands clasped together in her lap as she sat behind him in the first row of the gallery.


Throughout the trial, Martoma was largely unemotional and quietly took notes. His calm demeanor was a stark contrast from how he reacted when FBI agents first approached him in 2011 to tell him they investigating him for insider trading and wanted him to cooperate. Martoma briefly fainted and then refused to cooperate with authorities.

The judge did not immediately set a sentencing date.

Testimony during the three-week trial in the US District Court in Lower Manhattan made it clear that Cohen had directed much of the trading in shares of the two drug stocks — Elan and Wyeth — at the center of the case. At one point during the proceedings, Dr. Sidney Gilman, the prosecution’s main witness, who testified that he had provided confidential drug trial information to Martoma, told the jury that federal agents had initially told him that the real target of the investigation was Cohen.

Federal authorities have said they continue to investigate allegations of insider trading in several other stocks, but at the moment there are no pending criminal cases against any former or current SAC employees. Also, the clock is ticking on the legal deadline for filing criminal charges on most of the stock trading that the authorities have investigated for the past several years.

But a person briefed on the matter, who was not authorized to publicly speak about the investigation, said prosecutors were not close to bringing any charges against Cohen.


Cohen still faces civil actions.