Feds Bust $250M Insider Trading Hedge Funder

A former hedge fund portfolio manager was arrested Tuesday on charges that he helped carry out the most lucrative insider trading scheme in U. S. history, enabling investment advisers and their hedge funds to make more than $276 million in illegal profits.

Mathew Martoma was charged in U.S. District Court in Manhattan with conspiracy to commit securities fraud and two counts of securities fraud in a scheme that stretched from 2006 through July 2008 while he worked for CR Intrinsic Investors LLC of Stamford, Conn.

The FBI said the insider trading scheme developed after Martoma met a doctor in Manhattan involved in an Alzheimer’s disease drug trial in October 2006. The FBI said in a criminal complaint that he later obtained confidential information related to the final results of a drug trial.

Martoma’s attorney, Charles Stillman, was expected to issue a statement later Tuesday.

The Securities and Exchange Commission filed civil papers in the case against CR Intrinsic Investors, Mathew Martoma and Dr. Sidney Gilman. The civil complaint said the illegal money was earned in July 2008 when various hedge funds traded ahead of a negative public announcement involving the clinical trial results of an Alzheimer drug being jointly developed by Elan Corp. and Wyeth.

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Bloomberg.com: Insider Crackdown Uses SAC Manager to Pivot to Fraud

Steven A. Cohen’s SAC Capital Advisors LP is at the center of the biggest insider case ever brought in a nationwide crackdown on illicit hedge fund trading– one focusing on the exploitation of secret information on volatile health care stocks often obtained through expert consultants.

In doing so, the new case has brought the five year probe beyond the realm of technology stocks and into the burgeoning underworld of health care industry securities fraud. The charges against former SAC portfolio manager Mathew Martoma also bring U.S. prosecutors closer than ever to Cohen, the hedge fund’s billionaire owner and founder, in the biggest probe of insider trading in a generation.

Daily Mail: Ex-hedge fund manager charged over $275MILLION insider trading scam that is so huge it has ‘no historical precedent’