Former SAC portfolio manager Martoma indicted

Updated at: 12/21/2012 4:36 PM
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(AP) NEW YORK - A former hedge fund portfolio manager was indicted Friday for securities fraud in connection with what prosecutors say could be the most lucrative insider-trading scheme to date.

A federal grand jury in New York indicted Mathew Martoma on three counts of securities fraud and conspiracy to commit securities fraud.

Martoma worked for an affiliate of SAC Capital Advisors. Stamford, Conn.-based SAC is owned by Steven A. Cohen, one of the world’s richest men.

Martoma, of Boca Raton, Fla., was arrested last month the FBI in connection with the scheme that allegedly involved an arrangement between 2006 and 2008 to obtain secret, advance results of tests on an experimental Alzheimer’s drug.

According to the indictment, Martoma made trades in Elan Corp. PLC and Wyeth, pharmaceutical companies that were partners in the development of the experimental drug, using confidential information about a drug trial.

The trades allegedly included selling nearly all of the $700 million worth of shares the hedge fund held in both companies just before negative news of trial results were made public. Martoma also sold the stock short and made other trades allowing the firm to benefit when the stocks fell after the trial results were made public, according to the indictment.

The trades allegedly helped SAC gain profits and avoid losses to totaling $276 million. Martoma got a bonus of $9.3 million as a result of the illegal scheme, according to the indictment.

The indictment follows an earlier criminal complaint that federal prosecutors filed in November.

"Though disappointing, today’s events come as no surprise," Martoma’s lawyer Charles Stillman said in a statement. "The simple fact is that Mathew Martoma did not trade on inside information, is innocent of all these charges, and we look forward to his ultimate vindication."

(Copyright 2012 by The Associated Press. All Rights Reserved.)