Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Tuesday, November 20, 2012

Ex-SAC Capital Trader Charged in $276 Million Insider Trading Scheme

The SEC and the DOJ have filed complaints in parallel actions, charging Mathew Martoma, a former trader at CR Intrinsic, a division of SAC Capital, with insider trading in pharma stocks Elan and Wyeth.  According to the government, which says defendant made $276 million in combined profits and avoided losses, he obtained confidential information about a drug trial for an Alzheimer's drug from Sidney Gilman, a neurology professor and leading expert in Alzheimer's, through an expert network firm.  Dr. Gilman has entered into a nonprosecution agreement with the U.S. Attorney and has agreed to settle the SEC charges, and is cooperating with both investigations.

According to the SEC’s complaint, Martoma received a $9.3 million bonus at the end of 2008 – a significant portion of which was attributable to the illegal profits that the hedge funds managed by CR Intrinsic and the other investment advisory firm had generated in this scheme. Dr. Gilman, who was generally paid $1,000 per hour as a consultant for the expert network firm, received more than $100,000 for his consultations with Martoma and others at the hedge fund advisory firms. Dr. Gilman also received approximately $79,000 from Elan for his consultations concerning bapi in 2007 and 2008.

According to the Wall St. Journal story, the criminal complaint implicates Steven A. Cohen, the founder of SAC Capital Advisors, by referring to him as "Portfolio Manager A," who authorized many of the trades.

WSJ, Steven Cohen Implicated in Alleged Insider-Trading Scheme .

 Peter Lattman, NY Times, Ex-SAC Capital Trader Charged in $276 Million Insider Scheme

SEC, SEC Charges Hedge Fund Firm CR Intrinsic and Two Others in $276 Million Insider Trading Scheme Involving Alzheimer's Drug

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