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Former Hedge Fund Manager Caught in $276 Million Insider Trading Scheme

New York (HedgeCo.Net) – In what prosecutors are calling the most lucrative hedge fund insider-trading case ever prosecuted, the FBI yesterday unsealed charges involving insider trading during an alzheimer’s disease drug trial.

Mathew Martoma, a former portfolio manager for a division of a group of 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, “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. He will appear in Manhattan federal court on Monday, November 26, 2012, at 10:00 a.m.

Alex Akesson
Editor for HedgeCo.net
alex@hedgeco.net
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