by Howard Haykin

In 2014, Mathew Martoma, then a former portfolio manager for Stephen Cohen’s SAC Capital Advisor, was convicted of insider trading and sentenced to 9 years in prison. Federal prosecutors convinced a New York jury that Martoma earned $275 million in illicit gains by trading on insider information about an Alzheimer’s drug trial.

Defense attorneys unsuccessfully argued for Martoma's innocence by contending that the prosecution must prove insider trading by showing that the individual who supplied a tip sought personal gain or intended to confer a benefit to someone else. In the Martoma case, they said, the Michigan doctor had tipped Martoma about the Alzheimer’s drug trial to maintain a friendship, rather than to offer a benefit or further a “quid pro quo” relationship. 

Yet, in August 2017 and again in June 2018, the Second U.S. Circuit Court of Appeals sided with the federal jury and upheld Martoma’s 2014 conviction and 9-year prison term, concluding there was enough evidence to establish Martoma’s guilt despite defective jury instructions in the trial. The Second Circuit also noted that it didn’t matter how close the relationship was between the 2 people, as long as the tipper had an “intent to benefit” the recipient.

On Monday, the case ‘came full circle’ when the U.S. Supreme Court rejected without comment Martoma’s appeal and left in place the June 2018 ruling by the Second U.S. Circuit Court of Appeals.