A former hedge-fund portfolio manager was arrested Tuesday in what prosecutors are calling perhaps the most lucrative insider-trading scheme of all time — an arrangement to obtain confidential, advance results of tests on an experimental Alzheimer’s drug that helped investment firms make more than $276 million.
Mathew Martoma, 38, was charged in U.S. District Court in Manhattan with using the information to advise a hedge-fund owner to buy shares in the companies developing the drug, then later to dump those investments and place financial bets against the companies when the tests returned disappointing results.
Martoma’s trades helped reap a hefty profit from 2006 through July 2008, while he worked for CR Intrinsic Investors LLC of Stamford, Conn., an affiliate of SAC Capital Advisors, a firm owned by Steven A. Cohen, one of the nation’s wealthiest hedge-fund managers.
“The charges unsealed today describe cheating coming and going,” U.S. Attorney Preet Bharara said at a news conference. The scheme unfolded “on a scale that has no historical precedent.”
The government has been scrutinizing SAC since at least November 2010, when the FBI subpoenaed SAC and other influential hedge funds. Martoma is the fourth person associated with SAC Capital to be arrested on insider-trading charges in the past four years. A request for comment from SAC was not returned immediately.