Litigation Release No. 25022 / February 3, 2021
Securities and Exchange Commission v. CR Intrinsic Investors, et al., No. 12-cv-8466 (VM) (S.D.N.Y. filed Nov. 20, 2012)
On February 2, 2021, the U. S. District Court for the Southern District of New York entered final judgment against Mathew Martoma, a former portfolio manager at CR Intrinsic Investors, LLC, a former hedge fund advisory firm and affiliate of S.A.C. Capital Advisors, L.P.
In November 2012, the SEC filed a complaint in this action, charging Martoma with insider trading. As alleged, Martoma obtained confidential information about clinical trial results for a drug being jointly developed by two pharmaceutical companies from a doctor involved in the trials. According to the complaint, on the basis of the confidential information, Martoma then caused trades in the securities of the two companies to be made in several hedge fund portfolios ahead of the negative announcement of the trial results, thereby reaping profits and avoiding losses totaling over $275 million for funds advised by CR Intrinsic and S.A.C Capital.
In March 2013, the SEC filed an amended complaint naming S.A.C. Capital Advisors and four hedge funds managed by CR Intrinsic and S.A.C. Capital as relief defendants because they each received ill-gotten gains from the insider trading scheme. As part of the SEC’s litigation in this matter, the court established a fund to compensate investor victims of the fraud. The fund comprised over $601 million in disgorgement, prejudgment interest, and civil penalties paid in settlement by CR Intrinsic and the relief defendants. In separate distributions in August 2017 and July 2020, over $531 million was distributed to over 4,800 harmed investors. These payments fully reimbursed those investors.
In February 2014, Martoma was convicted after trial of insider trading for the same conduct alleged in the SEC’s complaint. In connection with his criminal conviction, Martoma was sentenced to 9 years in prison, and ordered, among other things, to forfeit more than $9 million, representing his compensation tied to the illegal trading. Martoma has now consented to the entry of a final judgment enjoining him from future violations of the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder.
The litigation resulting in the final judgment against Martoma has been handled by Thomas P. Smith, Jr., and the matter has been supervised by Sanjay Wadhwa, both of the SEC’s New York office.