It's the biggest insider trading case ever prosecuted. A jury handed down the latest guilty verdict Thursday against a former SAC Capital Advisors trader.
"Mathew Martoma guilty on all insider trading charges. Martoma was convicted of his role in two illegal trades on two pharmaceutical companies that helped SAC avoid losses of $276 million." (Via Fox News)
He was convicted of conspiracy to commit securities fraud and two counts of securities fraud. He faces possible prison sentences of 5 years for the conspiracy charge, and a 20-year sentence for each fraud charge. (Via CNBC)
The New York Times reports one of the trades had to do with information Martoma obtained from two doctors about an Alzheimer's drug had destructive side effects. As a result, SAC dumped $700 million in that company's shares.
And Martoma reportedly made a cushy $9 million bonus from that 2008 trade. But the amount of money associated with the case isn't the only reason it's such a big deal — it's all about the SAC.
The Manhattan United States Attorney's office has cracked down on insider trading, and SAC is one of the biggest fish it can fry. The hedge fund once held $14 billion in assets and promised clients an impressive 30 percent return. (Via U.S. Attorney's Office)
Martoma is the eighth former SAC employee found guilty of insider trading, and the hedge fund itself paid a settlement of $1.8 billion last November for related charges, according to USA Today.
But the attorney's office is also circling a bigger — and richer — target with these charges. The real goal is to find dirt on hedge fund founder Steven A. Cohen.
Cohen, who has amassed a $9 billion dollar fortune, has managed to skirt insider-trading charges despite "seven years of investigations, wiretaps, unearthed documents, and undercover informants," according toBusinessweek.
The Wall Street Journal reports Martoma's guilty verdict wasn't the only end goal of the trial: "Prosecutors had hoped … that Mr. Martoma could have given them something that has thus far eluded them: a witness to directly connect Mr. Cohen to illegal trading."
At least prior to his guilty verdict, Martoma was tight-lipped against his former employer. A PBS documentary further explains the atmosphere of the company.
"The way SAC works is that these traders operate in pods, and they're very independent, there's not a lot of oversight. And if Cohen likes one of your ideas and puts it in his portfolio, then you get a percentage of his profits as well."
In response to the investigations and trial, SAC has downsized to manage only Cohen's personal fortune. As for the attorney's office, Martoma's conviction marks a 79-0 record in acquiring guilty verdicts in insider trading cases.
