Another Indian-American in jail for insider trading

NEW YORK (TIP): After Rajat Gupta, it is the turn of another Indian American to go to prison for insider trading.

Mathew Martoma, who worked for hedgefund billionaire Steven Cohen, was given nine years in prison for what the prosecution described as one of the largest insidertrading schemes ever. The nine-year sentence was in line with the recommendation made to Judge Gardephe by prosecutors working for Preet Bharara.

Martoma, a 40-year old Keralite whose original name is Ajai Mathew Mariamdani Thomas was initially pursued in an effort to get his boss, but he refused to implicate Cohen and in the end took the fall for the illegal trading of stocks in two pharmaceutical companies that helped SAC book profits and avoid losses worth $275 million. Martoma was also ordered to forfeit a $9.38 million bonus he earned while working at SAC in 2008. The forfeiture includes the luxury home in Boca Raton, Fla., that the couple bought in 2010 for about $2 million.

the Prosecuted Mathew Martoma. Preet Bharara got Martoma nine years in prison

Hours before the sentencing hearing was scheduled to begin, Judge Gardephe indicated some of his thinking about Martoma’s illegal trades in shares of two drug companies, Elan and Wyeth. The judge said in a 25-page decision issued Monday morning that it was appropriate for him to consider all of the $275 million in profits and avoided losses made by Martoma and Cohen, his former boss.

Judge Gardephe noted that while prosecutors did not name Cohen as a coconspirator, the evidence at trial proved that Martoma “provided inside information to Cohen and this information was the basis for Cohen and SAC Capital’s subsequent trades in Elan and Wyeth securities.” Martoma was convicted of using inside information about a clinical trial for an experimental Alzheimer’s drug to help SAC make trades in shares of the two drug companies.

The trades in Elan and Wyeth – in which SAC sold large positions before the release of negative information about the clinical trial – took place over a few days in July 2008. The nine-year sentence is two years shy of the 11-year sentence given to Raj Rajaratnam, the co-founder of the former Galleon Group hedge fund, which remains the longest sentence anyone in the current insider trading investigation has received. With the sentencing of Mathew Martoma, Preet Bharara, U.S. Attorney for the Southern District of New York can legitimately claim another feather in his cap.

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