Select a prominent Insider Trading case;
Matthew Martoma case
Mathew Martoma, the portfolio manager who worked for an affiliate of billionaire Steve Cohen’s SAC Capital Advisors hedge fund firm, was sentenced to nine years in prison on Monday, one of the longest prison sentences ever handed out for an insider-trading conviction. The sentence, handed down by Judge Paul Gardephe in Manhattan, is the result of a series of terrible decisions made by Martoma, who is 40 and married with three young children. Earlier this year, a federal jury found Martoma guilty of getting material non-public information about the development of an Alzheimer’s drug from a doctor and trading on the information to make more than $200 million in profits for SAC Capital and $9 million in bonuses for himself. As part of the sentencing, the federal judge also ordered that Martoma pay back his $9.38 million in bonuses. The Martoma case was the best shot by federal prosecutors to build a case against Cohen, one of the richest and most successful hedge fund managers ever. Several individuals tied to SAC Capital have been convicted as part of a sprawling federal insider-trading investigation into SAC Capital, but federal prosecutors never accumulated enough evidence to go after Cohen directly. Instead, Preet Bharara, the U.S. Attorney in Manhattan, shut Cohen’s SAC Capital down by indicting the hedge fund firm, resulting in SAC Capital pleading guilty to criminal charges related to insider-trading and paying $1.2 billion. Cohen now runs Point72 Asset Management, a family office that manages his huge fortune. SAC also paid more than $600 million to settle with the Securities & Exchange Commission. All these penalties were essentially paid by Cohen, who owned all of SAC.
Martoma, who was fired by SAC, made a high-risk bet to try to fight federal prosecutors in Manhattan, despite their overwhelming success in prosecuting insider-trading cases and their repeated efforts to gain his cooperation in building a case against Cohen. The evidence that was built up against Martoma was large, including the testimony of an 81-year-old doctor. Martoma’s decision not to settle the case baffled lawyers and reporters following the case. Some suggested, probably correctly, that the value of his cooperation was limited after it was discovered that Martoma had been expelled from Harvard Law School for doctoring his transcript to make up better grades, diminishing his ability to obtain a good settlement. Still, on the surface it seems like federal agents didn’t know about the expulsion when they first confronted Martoma on his front lawn, causing him to faint. Even a settlement that did not help the feds get Cohen, but saved them from the trouble of going to trial against Martoma, potentially could have shaved many years off his prison sentence. In any event, prosecutors tried for months to get Martoma to cooperate. Martoma was particularly vulnerable because of the large profits that were made in the trades leading to his conviction. The ill-gotten profits figure into his sentencing under federal guidelines, as does his lack of contrition and assistance to prosecutors. Martoma will now have to live with his decision not to strike a deal with prosecutors. Of course his biggest mistake was engaging in insider-trading in the first place.
Introduce your selected topic. Provide a summary of the events. Explain the concept of insider trading with definitions. What should the public know about insider trading? Explain how your selected case applies to the concept of insider trading, with details.
Explain what the experts have said concerning your selected case. Also, share how insider trading issues could have been avoided.