Introduction
Mathew Martoma was a former vice president of research and development at SAC Capital Advisors, a hedge fund. He was convicted in 2014 of insider trading, and sentenced to two years in prison. In 2008, he began trading on behalf of SAC using information that he obtained from his employer. For example, in the days before a pending trial in which SAC was accused of insider trading, Martoma obtained information about the case and then sold his shares in SAC before anyone else could do so.
At one point, he traded more than 100 times as much as the rest of the portfolio managed by SAC during one month. He then turned around and made trades that were intended to obscure where he had moved his money between April and July 2008.
The SEC says that Martoma received confidential information from his co-workers at SAC. The SEC alleges that he used this information to make profits on stocks owned by other investors who did not know they were being traded on their behalf by Martoma’s employer.
What Did Mathew Martoma Do?
Mathew Martoma was a former portfolio manager at SAC Capital Advisors, an investment fund that manages more than $15 billion. He was charged in federal court with securities fraud and has pleaded guilty.
Martoma had access to information about two drugs that were being developed by pharmaceutical companies that had business dealings with SAC Capital. He used this information to trade on the inside information, profiting from these trades.
According to the government, he ran a secret Ponzi scheme from 2006 to 2013 that defrauded investors of more than $1 billion. The government has charged him with securities fraud and wire fraud, among other crimes According to court documents, Martoma used his job at SAC to trade on inside information about stocks he knew were being investigated by the U.S. attorney’s office in Manhattan — and then betting against those shares once they were revealed as criminal targets.
In one instance, prosecutors say he made nearly $1 million by trading on information he obtained while working at SAC, but then shorted those same shares after they were publicly named as potential targets of federal regulatory action.
How Did Mathew Martoma Commit Securities Fraud?
By using his high-level position at SAC Capital to gain access to confidential information that enabled him to make illegal trades. In October 2008, he was charged with insider trading by the SEC and pleaded guilty to six criminal counts in February 2010. The case against him was based on his trading of shares of two drug companies: Wyeth and Elan Corp., both of which have since been taken over by Pfizer Inc.
The details of Martoma’s alleged crimes are laid out in documents filed by the government as part of a civil lawsuit against SAC Capital that seeks to recover some $1 billion in damages it claims were stolen by Martoma.
The government said that Martoma made more than $275 million from trading on tips from insiders at Valeant Pharmaceuticals International Inc., which was then known as Biovail Corp., and Regeneron Pharmaceuticals Inc., another drugmaker acquired by Pfizer last year.
What Was Mathew Martoma’s Historic Insider Trading Scheme?
Mathew Martoma’s historic insider trading scheme was a Ponzi scheme that involved the use of material nonpublic information in raising money from investors. The scheme was also known as the “Pension Fund Drop” or “Pension Fund Heist.” Martoma, who worked for the external hedge fund SAC Capital Advisors, had access to inside information about drug pricing trends at pharmaceutical firm Retrophin Inc. In 2010, Martoma began using that information to trade on his own account and made $459 million by 2011.
The SEC filed civil charges against him in 2012 and he was convicted of insider trading in 2015. He is currently serving an eight-year prison sentence. In September 2018, it was reported that prosecutors had reached a settlement with one of the companies involved in the case against Martoma where they would receive $20 million in return for their cooperation.
Mathew Martoma is a hedge fund manager who was convicted of insider trading charges in 2014. It was the largest such case in history and had a dramatic impact on Wall Street.
In 2005, Martoma noticed a pattern between the stock price of Elan Corp., a pharmaceutical company, and the price of the drug for treating lung cancer called Xalkori. He started buying Elan stock ahead of when the drug was approved by the Food and Drug Administration (FDA). When it became available in 2010, Martoma then sold his shares at a profit to friends and family members who were also investors. The scheme earned him more than $275 million before being caught by the Securities and Exchange Commission (SEC).
The SEC found that Martoma did not have any information about when Xalkori would be approved or what price it would reach when it came out on the market. The scheme was so sophisticated that it took four years before he was actually caught by law enforcement officials because they couldn’t figure out where he got his information from.
In April 2015, Mathew Martoma was arrested and charged with a securities fraud scheme that netted him $275 million. The trial resulted in a guilty verdict on all counts of insider trading. The government’s case against Martoma was built on the testimony of cooperators who provided information about his illicit activity.
Martoma made millions in the stock of GlaxoSmithKline (GSK) by purchasing shares based on confidential information he received from former GSK CEO Andrew Witty and other company executives. He also received tips from his friend and former colleague at hedge fund SAC Capital, Raj Rajaratnam. The insider trading scheme was outlined in an explosive report commissioned by the SEC in 2006.
During this time period, however, there were few instances where an individual was found guilty of insider trading. This is largely attributed to an ongoing debate about whether such activity should be illegal or not.
The case, which began with a single tip to the U.S. government in December 2008, led to the conviction of SAC Capital Advisors founder Steven A. Cohen and five other individuals on insider trading charges.
Martoma was sentenced to 18 months in prison and ordered to pay $9 million in restitution as part of his plea agreement with prosecutors. He is currently serving his sentence at an undisclosed location inside the Federal Correctional Institution in Dublin, California.
The Martoma case is one that remains fresh in investors’ minds today because it shows how easy it is for traders to get away with insider trading schemes. The scam relied on two different types of trades: those that were made for personal gain and those that were made for the benefit of others — such as hedge funds who were allegedly using Martoma’s information to make their own trades at higher prices than they otherwise would have been able to command.”And while this may seem like something from another era, it’s still happening today.
How Is Insider Trading Still Prevalent Today And How Does It Impact Today’s Markets?
Insider trading is still prevalent today and it impacts the markets today. The main reason for this is the lack of regulation. In order for a stock to be traded on an exchange, it must be registered with the SEC. Without this registration, there is no way to know whether or not the person who wants to buy or sell shares of a company has insider information.
The only way to prevent insider trading is through regulation, which most people believe that they do not need because they trust their neighbors not to trade illegally. However, this trust can be easily broken because many people are willing to break the law if they think that they will get away with it.
In addition, without proper regulation, there is also no way to determine who actually has access to certain types of information before they are made public by another party such as a journalist or investor.
Despite the financial penalties that are imposed on those who are caught, such as Mathew Martoma himself and many others like him, corporate executives continue to spend millions on collecting secret information that can help them make more profits than the market. In the past, the government used to be able to track down and punish insider traders, but now they are not able to do so. This is because of the rise of technology and the use of cell phones.
The use of cell phones has caused a lot of problems for law enforcement agencies and regulators. Nowadays, people can buy stocks through their cell phones without anyone knowing what they’re doing. The problem with this is that there are no laws in place that regulate this type of activity.
In addition, another reason why insider trading still occurs today is that it is a very lucrative business for some people. If you know about a company’s upcoming earnings report and you want to sell your stock before it goes up in value then you can make quite a profit from such knowledge.
Another reason why insider trading still occurs today is that people who are involved in this type of activity tend to be very secretive about their activities which makes them difficult to track down. Insider trading is the practice of making a profit by trading on information that has been made public prior to its release. Insider trading can take place in many different ways, but the most common form is when someone who has access to non-public information buys or sells shares before it is released to the general public.
In 1987, Arthur Levitt became Chairman of the SEC and set out to crack down on insider trading. He ordered all SEC employees to sign an affidavit stating that they would not trade stocks during work hours for 3 years.
The first major insider trading case was brought against John Gutfreund, who was convicted in 1989 for insider trading after he had bought $2 million worth of stock from his firm’s broker at a price lower than what he had paid for it after receiving confidential information from his broker about a new product being developed by the firm.
Insider trading is a form of illegal trading in which the person is in possession of material, nonpublic information that has not been made public and is not generally available to the public. Insider trading occurs when someone obtains or attempts to obtain confidential or nonpublic information about a company or stock, then trades based on that information before it becomes publicly available.
The SEC regulates insider trading through Rule 10b-5 and Rule 10b5-1 under the Securities Exchange Act of 1934 (the “Exchange Act”). Under these rules, an individual who is acting on behalf of his employer (or another entity) must generally disclose any material nonpublic information he possesses prior to trading. An individual also must generally disclose any material nonpublic information he receives directly from an issuer that has not been publicly disseminated.
The SEC’s rules apply only to individuals who are “outside the business” of reporting listed companies; i.e., they do not cover employees of brokerages, investment banks, research firms, or other entities involved in securities trading activities. The rules do not apply to individuals who are part-time traders for their own accounts or for the accounts of others; these individuals are subject to SEC oversight if they trade securities for their own accounts.
What Can We Learn From The Mathew Martoma Story?
The Mathew Martoma story is yet another reminder of the bad ends of leveraging insider information to make unprecedented profits. The SEC has sufficient technology to track wealth in a very well-calibrated manner.
When done in a haphazard manner, insider trading will raise red flags all over the SEC’s radar. And that is the first and last mistake you can hope to make. The downfall of many corporate moguls teaches us that profiteering off secret information of this nature is never sustainable. If controlled methodologically, there might be a way out – but it requires planning that doesn’t come easily to the typical trader’s mind.
FAQs
Where is Mathew Martoma Now?
It is not clear what Martoma is doing with his life post-prison. His current activities remain a mystery. It is possible he is still involved in the financial world, or perhaps he is taking some time to regroup and reflect on his experience with the justice system.
Whatever he may be up to, it is certain that Mathew Martoma has paid for his crime and served his time. It remains to be seen how he will move forward from here, but one thing is certain: his story serves as a reminder of the consequences of insider trading and why it should never be taken lightly.
How Did the SEC Find Out About What Mr. Martoma Was Doing?
According to the Securities and Exchange Commission (SEC) investigation, evidence found that Martoma had obtained confidential information about two pharmaceutical companies – Elan and Wyeth – from Dr. Sidney Gilman, a doctor who was in charge of clinical trials for both drugs.
Martoma allegedly used this confidential information to make over $275 million from hedge fund SAC Capital Advisors, where he worked for. The SEC found out about this activity by analyzing email and phone records and examining trading data from SAC Capital Advisors. They discovered that Martoma had placed trades before the public announcements of positive drug trial results for the two companies, which generated substantial profits for the hedge fund.
What was Matthew Martoma accused of doing?
Matthew Martoma was accused of insider trading in a $275 million scandal involving two companies: Elan Corporation and Wyeth. He was accused of using confidential information to buy and sell stocks for illegal profits.
How was Matthew Martoma able to get confidential information?
Martoma was able to get confidential information from a doctor who was involved in clinical trials for Elan and Wyeth. The doctor provided Martoma with information that was not yet public knowledge which allowed Martoma to buy and sell stocks for illegal profits.
What was the outcome of the case?
In 2014, Matthew Martoma was convicted and sentenced to nine years in prison and ordered to pay a $9.3 million fine. He was also ordered to forfeit $43.8 million in profits gained from the illegal trades.
