Hedge Fund Agrees to Pay $600M to Settle Insider-Trading Charges

SAC Capitol Settlement Mathew Martoma
(Spencer Platt/Getty Images) Mathew Martoma walks with his wife Rosemary and his lawyer after leaving Manhattan federal court on Jan. 3 in New York City. Martoma worked for CR Intrinsic Investors, which Friday agreed to pay more than $600 million to settle insider-trading charges.
By SARAH SKIDMORE

Two affiliates of SAC Capital Advisors, the hedge fund run by billionaire Steven Cohen, will pay more than $614 million in what federal regulators are calling the largest insider trading settlement ever.

The Securities and Exchange Commission charged CR Intrinsic Investors with insider trading in 2012, alleging that portfolio manager Mathew Martoma illegally obtained confidential details about an Alzheimer's drug trial from a doctor before the final results went public and traded on that information. The SEC said Friday that the fund agreed to pay more than $600 million to settle the charges. The parties neither admit nor deny the charges.

The SEC's complaint alleged that Sidney Gillman, a doctor who moonlighted as a medical consultant, tipped drug safety data and negative drug trial results to Martoma two weeks before developers Elan Corp. (ELN) and Wyeth made those results public in 2008. Martoma and CR Intrinsic then caused several hedge funds to sell more than $960 million in Elan and Wyeth securities in a little more than a week.

Regulators added SAC Capital Advisors and four hedge funds managed by CR Intrinsic and SAC Capital as defendants, saying they each received ill-gotten gains from the scheme.

"The historic monetary sanctions against CR Intrinsic and its affiliates are a sharp warning that the SEC will hold hedge fund advisory firms and their funds accountable when employees break the law to benefit the firm," George S. Canellos, acting director of the SEC's Division of Enforcement, said in a statement.

The settlement is subject to the approval of a U.S. District Court judge. It doesn't settle charges against Martoma, whose case is still in litigation.

Also Friday, the SEC settled charges against Sigma Capital Management for $14 million. Sigma allegedly profited illegally from early information about the earnings of two technology companies.

The cases stem from a long-running probe of insider trading by hedge funds, many of which are affiliated with SAC Capital. The government has targeted multiple employees of the Stamford, Conn.-based hedge fund, though no charges have been brought against Cohen.

SAC said in a statement Friday that it is happy to put these matters with the SEC behind it.

"This settlement is a substantial step toward resolving all outstanding regulatory matters and allows the firm to move forward with confidence," the company said. "We are committed to continuing to maintain a first-rate compliance effort woven into the fabric of the firm."

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Daniel Wagner in Washington contributed to this report.


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kluj1

Forget fining them.....50 years no parole should do it

March 17 2013 at 9:40 PM Report abuse rate up rate down Reply
Elise

Who gets the money from the fine?

March 17 2013 at 6:19 PM Report abuse rate up rate down Reply
ralonne

I just typed a G/D COMMENT AND WHEN I SIGNED IT THE SITE REMOVED IT. TYPICAL AOHELL COMMENTING GLITCHES THAT ARE NEVER RESOLVED - THIS IS WHY I HATE COMMENTING ON THESE AOL SITES.

March 17 2013 at 3:03 PM Report abuse rate up rate down Reply
bigwingnut

Until the fine subtstantially exceeds the illegal gains, there is not incentive to modify the illegal behavior. A little jail time wouldn\'t hurt, either!

March 17 2013 at 2:47 PM Report abuse rate up rate down Reply
zerryl8897

Cannot help but wonder how much money they made on their shady deals after the fine. I suppose these jerks are to big to take to court and put out of business.

March 17 2013 at 1:59 PM Report abuse rate up rate down Reply
higgdj7

Anyone going to jail??? Where's Eliz. Warren when we need her.

March 17 2013 at 1:19 AM Report abuse +2 rate up rate down Reply
1 reply to higgdj7's comment
dvdsn61

She's probably off counting the money she made with them.

March 17 2013 at 5:39 PM Report abuse -1 rate up rate down Reply