NEW YORK - The arrest of a former hedge fund portfolio manager in what prosecutors are calling one of the most lucrative insider trading schemes ever indicates that prosecutors may be setting their sights higher - toward a wealthy business leader the suspect's firm was connected to, an expert says.
Mathew Martoma made an arrangement to obtain secret, advance results of tests on an experimental Alzheimer's drug that netted more than $276 million for his fund and others, according to charges filed in U.S. District Court in Manhattan.
He was arrested Tuesday on allegations that he used the information to advise other investment professionals 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 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.