Former S.A.C. Capital Advisors fund manager Mathew Martoma was found guilty in the most lucrative insider-trading scheme ever as federal prosecutors racked up a seventh conviction in their six-year probe of the hedge fund and its billionaire founder Steven A. Cohen.
Jurors in Manhattan federal court found Mr. Martoma used secret tips on clinical trials of an Alzheimer's disease drug to trade Wyeth and Elan Corp. shares. In doing so, Mr. Martoma reaped a $275 million benefit for the hedge fund. Mr. Martoma chose to risk a trial after rejecting U.S. offers of a deal for cooperation. He faces as long as 20 years in prison on the most serious counts.
A Martoma conviction “is a major win for the government,” said Anthony Sabino, a law professor at St. John's University in New York, in an interview. “It may embolden them to go after Cohen.”
The conviction follows a similar verdict against S.A.C. Capital fund manager Michael Steinberg, who was found guilty in December of a different scheme at the hedge fund. He hasn't been sentenced and might yet seek to strike a deal with prosecutors.
Mr. Martoma's conviction raises the possibility that he also might seek to cooperate against Mr. Cohen in exchange for leniency, Mr. Sabino said. The disclosure of Mr. Martoma's expulsion from Harvard Law School for creating a phony transcript might lead prosecutors to reject such a deal, however, given the possible damage to his credibility as a witness.