Key figure in notorious biopharma insider case loses an appeal — broadening scope for future cases
Mathew Martoma will be staying in prison.
A US appeals court ruled today that Martoma’s insider trading conviction three years ago was not tainted by improper instructions, denying him a shot at a new trial and possible freedom.
In the process the federal judges, divided 2-1 in the ruling, widened the latitude of federal prosecutions for insider trading. Picking up on a recent Supreme Court decision, the court established that an individual can be convicted of receiving insider information as a “gift,” without giving the tipper a tangible benefit in payment.
Martoma will remain in a Miami prison after being sentenced to serve a 9-year sentence for insider trading after the government’s star witness – former University of Michigan researcher Sidney Gilman-testified that Martoma had pressed him for confidential information on bapineuzumab, then a late-stage drug in the clinic for Alzheimer’s that went on to implode in Phase III.
Martoma’s unit at SAC Capital Advisors made $275 million trading shares of Elan and Wyeth with the information.
SAC’s billionaire portfolio manager Steven Cohen was not charged with insider trading, but he did accept a decision that the company — which changed its name to Point72 Asset Management — would only handle Cohen’s money for two years. The limitation ends January 1.
Martoma was convicted after refusing to help federal investigators with their investigation.
Circuit Judge Rosemary Pooler disagreed with the decision, noting that he majority “significantly diminishes the limiting power of the personal benefit rule, and radically alters insider-trading law for the worse,” according to a report from The New York Times.