A former hedge fund trader was sentenced to nine years in prison on Monday for his part in what prosecutors called “the most lucrative insider trading scheme ever”.
Judge Paul Gardephe also ordered Mathew Martoma, a former portfolio manager at SAC Capital, to forfeit $9.38m, equal to the bonus he made on the illegal trades.
Martoma, 40, was convicted in January of insider trading in two drug stocks, Elan and Wyeth. Prosecutors said he earned profits and avoiding losses of $275m on the trades, made while working at SAC, the hedge fund run by billionaire Steve Cohen.
The court’s probation department calculated that under sentencing guidelines based on the size of the fraud, he could receive almost 20 years. In court filings Martoma’s lawyers called the suggestion “outrageous” and the probation department ultimately recommended an eight-year sentence.
Hours before the sentencing hearing, Gardephe issued a ruling stating that it was appropriate for him to consider all of the $275m in profits and avoided losses made both by Martoma and his former boss.
“Today’s sentence of a lengthy prison term is well-suited to the audacity of the illegal trading in this case,” Preet Bharara, the US attorney for the southern district of New York, said in a statement.
“The long and short of Martoma’s trading is that he traded his liberty, his name, and his time with his family for what in the end is nothing.”
The sentencing comes amidst further investigations into SAC and Cohen. Prosecutors had been hoping that Martoma would cooperate and inform on his former boss. But Martoma pleaded not guilty and chose to fight the case.
Martoma is the eighth former or current SAC employee to be convicted of insider trading.
Prosecutors indicted SAC in January 2013, calling the company a “magnet for market cheaters”. Last November the firm agreed to plead guilty and pay a $1.6bn fine. A civil case brought by the SEC charging Cohen with failing to supervise his employees is continuing.
Cohen has shut down his hedge fund and now spends his time running Point72 Asset Management, a so-called “family firm,” which only handles Cohen’s money and that of his employees. As part of the plea agreement, his firm is no longer permitted to manage money for outside investors.
Martoma’s sentencing comes amid a crackdown on insider trading by US authorities that had led to stiffer sentencing for those convicted.
Matthew Kluger, a former corporate lawyer, currently holds the record for the longest term ever imposed in an insider-trading case. In 2012 Kluger was sentenced to 12 years in jail for leaking confidential information from his employers, some relating to the biggest tech deals of the past decade.
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