SAC fund manager sentenced to 9 years

Anthony Oreilly

A former portfolio manager at SAC Capital Advisors, a hedge fund founded and lead by Great Neck native Steven Cohen, was sentenced to nine years in federal prison for his role in the largest insider trading scheme in U.S. history, the United States Attorney in Manhattan announced Monday. 

“SAC Capital portfolio manager Mathew Martoma received a bonus of more than $9 million for the $275 million he made for his hedge fund through the most profitable insider-trading scheme ever charged,” said Preet Bharara, the United States Attorney in Manhattan, in a statement. “Today, Martoma was sentenced to nine years in prison, and financial penalties that strip him of the ill-gotten millions in proceeds of his crime.” 

Martoma, 40, was also ordered by U.S. District Court Judge Paul G. Gardephe in Manhattan to forfeit $9.3 million “as well as his interests in his Florida home and several bank accounts,” Bharara said, and will also be sentenced to three years of supervised release after his prison sentence. 

In February, Martoma became the eighth employee of Cohen’s hedge to be convicted on insider trading charges. 

The case was unique in the ongoing investigation into SAC as prosecutors were able to link Cohen, 57 and an alumnus of Great Neck North High School, to Martoma’s inquiries into experimental Alzheimer’s medication. 

Martoma was able to obtain information about the experimental Alzheimer’s medication by talking to several doctors involved in the testing of the drug, including gaining access to negative information about the drug two weeks prior to its public release, Bharara said. 

Bharara said that Martoma and Cohen had a 20-minute phone call a day before the hedge fund sold two drug stocks, which, prosecutors said, helped SAC generate profits of $275 million in July 2008.

Martoma repeatedly refused to tell FBI agents what he and Cohen discussed, Bharara said.

During the trial, Gardephe unsealed information revealing Martoma had been expelled from Harvard for changing several grades on his transcript. That evidence was never used during the trial.

Cohen has not been accused of any criminal wrongdoing, but was been named in a Securities and Exchange Commissions lawsuit accusing him of not properly supervising his employees.

The SEC alleged that Cohen failed to prevent employees that he directly supervised from making illegal trades, despite having prior knowledge of their intentions to do so.  Cohen allegedly made more than $200 million in profits through insider trading.

His Connecticut-based company, now renamed Point72 Asset Management, in July paid a $900 million fine as part of his plea deal with the SEC that forced the company to shut its doors and no longer accept money from outside investors. The plea deal also included $300 million in forfeited profits, bringing the total penalty to $1.2 billion.  

In December, Michael Steinberg, also an alumnus of Great Neck North High School, was convicted on four counts of securities fraud and one count of conspiracy. 

“Like many other traders before him who, blinded by profits, lost their sense of right and wrong, Steinberg now stands convicted of federal crimes and faces the prospect of losing his liberty,” Bharara in a statement following Steinberg’s conviction. 

Steinberg in May was sentenced to 42 months in prison and was also ordered by U.S. District Judge Richard J. Sullivan to forfeit $365,142.30 to the federal government, pay a $2 million fine for using confidential stock information to make a profit for his company and to serve three years of supervised release.

“Michael Steinberg traded on information from company insiders at Dell and NVIDIA to reap nearly $2 million in illegal profits. Today he has learned the steep cost of those transactions,” Bharara said in a statement following Steinber’s sentencing. 

Steinberg worked as a portfolio manager for Cohen and was convicted of receiving confidential information about Dell and NVIDIA stocks, which he then used to generate $1.4 million in profits.

Steinberg and Cohen are avid art collectors, who frequently visited several art galleries and stores in Great Neck, according to published reports.

Cohen and Steinberg have both contributed significant amounts of money to various not-for-profit organizations.  

Steinberg helped to found Natan, which, according to its website, “supports entrepreneurial organizations that demonstrate an innovative approach to addressing the challenges facing Jews around the world” by giving out grants. 

The Steven and Alexandra Cohen Children’s Medical Center of New York in New Hyde Park, which is part of the North Shore-LIJ Health System, and a center at Mt. Sinai Hospital in New York City, are named after Cohen and his wife.

Cohen’s personal fortune of about $9 billion is being managed by Point72, according to published reports.

About the author

Anthony Oreilly

Share this Article