The US Supreme Court on Monday rejected an appeal by Mathew Martoma, a former portfolio manager for billionaire Steven A. Cohen, challenging a conviction for insider trading.
The Supreme Court left in place a June 2018 ruling by the New York-based 2nd US Circuit Court of Appeals, which found there was enough evidence to establish Martoma’s guilt despite defective jury instructions in the trial. Martoma had worked at the CR Intrinsic Investors unit of Cohen’s SAC Capital Advisors LP.
At issue in the appeal was whether 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.
The 2nd Circuit had upheld Martoma’s conviction and nine-year prison term in August 2017, but in a modified ruling almost a year later withdrew its prior finding that the jury instructions were “not obviously erroneous.”
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The appeals court decided that the instructions wrongly allowed a conviction solely on evidence that a Michigan doctor had tipped Martoma about a Alzheimer’s drug trial to maintain a friendship, rather than to offer a benefit or further a “quid pro quo” relationship – something done in exchange for something else.
Martoma was convicted in February 2014 for making $275 million of illegal gains in Elan Corp and Wyeth. Now called Point72 Asset Management LP, SAC pleaded guilty to fraud and paid $1.8 billion in U.S. criminal and civil settlements. Cohen was not criminally charged.