Mathew Martoma, a former portfolio manager at billionaire Steven A. Cohen's SAC Capital Advisors LP hedge fund, was sentenced on Monday to nine years in prison for engaging in what authorities called the most lucrative insider trading scheme in U.S. history.
U.S. District Judge Paul Gardephe in New York said he had to account for the "enormous" $275 million gain SAC obtained as a result of illegal trades in pharmaceutical stocks. Prosecutors said the trades were based on tips Martoma received about a clinical trial for an Alzheimer's drug.
"I cannot and will not ignore that the gain is hundreds of millions of dollars more than ever seen in an insider trading prosecution," Gardephe said.
The sentence came despite appeals for leniency by Richard Strassberg, Martoma's lawyer, who cited "fragile family circumstances." Gardephe also ordered Martoma to forfeit $9.3 million, including his Boca Raton, Florida, home.
While Martoma, 40, faced up to 19-1/2 years in prison under federal sentencing guidelines, Gardephe said such punishment should be reserved for repeat offenders or criminal enterprise leaders.
But the judge said a severe sentence was nonetheless necessary, saying "there was nothing accidental about Mr. Martoma's conduct or the gain realized."
Martoma, whom a jury convicted in February of securities fraud and conspiracy, made no comment as he left the court holding his wife's hand.
The ex-trader and his family were "devastated by the outcome," said Lou Colasuonno, a spokesman for Martoma, saying an appeal is planned.
The nine-year sentence is among the longer prison terms in U.S. insider trading cases, reflecting a trend of increasingly lengthy sentences in recent years.
In 2012, corporate lawyer Matthew Kluger was sentenced in New Jersey to 12 years for trading on information from law firms about mergers. A year earlier, Galleon Group hedge fund founder Raj Rajaratnam was sentenced in New York to 11 years.
Manhattan U.S. Attorney Preet Bharara, whose office is engaged in a broad crackdown on insider trading, called the nine-year sentence "well-suited to the audacity of the illegal trading in this case."
The case against Martoma, who worked in SAC's CR Intrinsic Investors unit, stemmed from a long-running insider trading investigation of the hedge fund.
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