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Ex-SAC Fund Manager Martoma Convicted in Insider Trading Case

<p>Mathew Martoma was found guilty of two counts of securities fraud and conspiracy to commit securities fraud.</p>
Mathew Martoma, a former SAC Capital portfolio manager, was found guilty of insider trading.
Mathew Martoma, a former SAC Capital portfolio manager, was found guilty of insider trading.Mark Lennihan / AP
/ Source: Reuters

A former trader with hedge fund SAC Capital was convicted of insider trading on Thursday, months after the massive fund run by Steven A. Cohen was slapped with a record $1.8 billion insider trading penalty.

Mathew Martoma allegedly used inside information about a clinical drug trial to help SAC net profits and avoid losses totaling about $276 million in 2008. The indictment alleged that Martoma told Cohen about the results of the drug trial, in what prosecutors have described as one of the largest insider trading schemes ever uncovered.

SAC then sold stock in the company, Elan, and purchased options on the premise that the company’s stock would tumble after the drug trial results were announced, according to the complaint.

Billionaire Cohen has not been charged with any crimes.

“The firm and Steve Cohen are confident he acted appropriately,” a spokesman for Cohen told NBC News last year.

Seven other former or current employees at SAC Capital have been convicted of insider trading. Martoma could face a maximum of up to 45 years in prison, though he will likely serve significantly less.

According to the settlement the company reached with federal prosecutors in the fall, SAC will no longer operate as an investment advisor, and will manage only Cohen’s personal assets. Those have been estimated by Forbes at about $9.4 billion.

“In the short run, 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,” Preet Bharara, U.S. Attorney for the Southern District of New York, said in a statement on Thursday.

Martoma is the 79th individual to be convicted for insider trading in New York’s Southern District over the past four years, Bharara said in the setatement.

Reuters and the Associated Press contributed to this report.