Ex-SAC Capital portfolio manager found guilty

Former hedge fund employee found guilty by Manhattan jury, while firm's founder escapes criminal charges, for now.

The decade-long SAC Capital Advisors hedge fund case may finally come to an end with the conviction of another ex-SAC portfolio manager on Thursday.

A Manhattan federal jury found Mathew Martoma, 39, guilty of insider trading, including seeking out confidential information related to a clinical trial for an experimental Alzheimer’s drug.
He will face a prison sentence of between seven and 10 years. The judge has not set a sentencing date.

Confidential information – provided by a doctor with access to the results of the clinical trial, and a main witness in the case – helped SAC generate $275 million in profits in July 2008.

Testimony in Martoma’s trial revealed that SAC founder, Steve Cohen, directed most of the trading in shares of the two drug stocks, Elan and Wyeth. The verdict comes just as Cohen plans to reconfigure his firm into a family office to manage his $9-billion in personal assets.

As of now, Cohen, 57, has not been criminally charged, but his 22-year-old firm – SAC Capital Advisors – plead guilty to securities fraud charges last November, agreeing to pay a $1.2 billion penalty. Cohen does face a civil administrative failure to supervise action, filed by the Securities and Exchange Commission.

Federal authorities say the investigation into alleged insider trading in several other stocks that SAC traded in continue, but no other criminal cases are pending.

Martoma is the 79th person to be convicted or plead guilty since the insider trading scheme in the $2.2- trillion hedge fund industry was dismantled in 2009.