A former portfolio manager at SAC Capital was arrested and charged with insider trading for allegedly dumping shares of two pharmaceutical companies after learning the results of a secret drug trial and made $276m in profits, in what authorities believe is the most lucrative illegal trading scheme.
Agents with the Federal Bureau of Investigation arrested Mathew Martoma early on Tuesday at his Boca Raton, Florida home. Prosecutors with the US attorney’s office in Manhattan, which announced the charges, said it “is believed to be the most lucrative insider trading scheme ever charged, resulting in benefits to the hedge fund of more than a quarter of a billion dollars.”
Mr Martoma worked for CR Instrinic, a unit of SAC Capital, the $14bn hedge fund run by Steven Cohen. SAC Capital had no immediate comment. Mr Martoma could not immediately be reached.
According to the complaint, Mr Martoma, a trader of pharmaceutical stocks, in October 2007 learnt confidential results of an Alzheimer drug trial conducted by Elan and Wyeth. Mr Martoma was introduced to a doctor, Sidney Gilman, involved in the drug trial the year before through GLG, an expert network firm, which matches money managers with industry experts.
On July 17 2008, Mr Martoma allegedly obtained the final disappointing results of the drug trial from Mr Gilman and three days later, according to the complaint allegedly “spoke to the owner” of the hedge fund where he worked and recommended selling Elan and Wyeth before the drug trial results were made public.
The next day, according to the complaint, Mr Martoma and the hedge fund owner instructed a trader to sell its entire 10.5m share position in Elan and 7m shares of Wyeth. The hedge fund also placed a bet that the two stocks would drop.
Source:
Financial Times
Former SAC Trader Busted With Biggest Insider Trading Profit In History
