Tuesday, September 9, 2014

Trader Sentenced to 9 Years for the Non-Crime of Insider Trading

Former SAC Capital Advisors LP portfolio manager Mathew Martoma was sentenced to nine years in prison for  insider-trading .

Martoma, 40, was convicted of making $275 million for SAC by using  tips to trade in Elan Corp. and Wyeth LLC. He rejected government offers of leniency in exchange for his cooperation in the probe of SAC founder Stephen A. Cohen and his Stamford, Connecticut-based hedge fund.

Prosecutors claimed that by 2008 the hedge fund had accumulated a huge position in Elan and Wyeth, while Martoma was getting inside information on tests that were going well of  a new drug under development.

SAC reversed its bullish stance in July 2008, soon after Martoma got confidential information on disappointing drug trial results. Martoma and Cohen shared a 20-minute call on July 20, 2008. The firm liquidated its $700 million position in the companies within days, prosecutors said.

Bottom line, by Martoma's trading, he was making the market in these stocks more reflective of the true facts at the companies. For this he ends up in jail.

For more on insider trading see: Judge Needs a Lesson in Finance and Economics.



  1. I'm confused - if insider trading is a crime, why isn't half of Congress in jail?

    1. Unfortunately, the law does not apply to those wielding political power.

  2. Insider trading isn't a crime for insiders, only outsiders.

  3. have you ever tried to find information that defines what insider trading means? It's (purposefully?) written in vague terms. I suspect anyone actually convicted of this crime has pissed off someone on power.