New York (HedgeCo.Net) – The trial against former SAC Capital trader Mathew Martoma for insider trading during an Alzheimer disease drug trial has started this week in that is being called the most lucrative hedge fund insider trading cases ever prosecuted.
CBS News reports that the Federal Judge, Paul Gardephe, has already ruled that a fainting spell Martoma suffered when first questioned cannot be introduced to the jury as evidence of “consciousness of guilt.”
The judge said, according to CBS News, that the episode would “taint the jury,” and that; “Martoma’s episode is not proof of guilt and cannot be used in his trial, which begins next week. Gardephe said being accused of insider trading is likely shocking and highly disturbing, whether someone is guilty or innocent.”
Martoma, a former portfolio manager for a division of a group of SAC-affiliated hedge funds, allegedly used inside information that he received from a doctor who served as an adviser to Elan Corporation PLC on the clinical trial of an Alzheimer’s Disease drug to make profits and avoid losses for the hedge fund in an amount totaling approximately $276 million. Martoma and his then-employer, SAC Capital Advisors, liquidated holdings in two companies after receiving insider information, prosecutors allege.
“Yet another privileged hedge fund professional stands accused of insider trading.” Manhattan U.S. Attorney Preet Bharara said when the hedge fund trader was first arrested, “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 $276 million, and Martoma himself walked away with a $9 million bonus for his efforts.”
Martoma was arrested at his home in Boca Raton, Florida, and made an initial appearance in federal court in West Palm Beach, Florida.
Another SAC trader, Michael Sienberg, also suffered a fainting spell when he was presented with his guilty verdict.
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