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A New York jury on Thursday convicted a former portfolio manager for SAC Capital of insider trading in the government's latest victory against the once-mighty hedge fund.
Matthew Martoma was found guilty of violating US securities laws with trades based on confidential testing data on prospective Alzheimer's medications developed by pharmaceutical firms Elan and Wyeth.
A pair of doctors testified in the case that they had passed the confidential data Martoma, showing disappointing test results for the drugs.
SAC subsequently sold virtually all of its $700 million investment exposure to the two companies, according to the government's indictment.
When Elan and Wyeth finally disclosed the test results, their shares plummeted, and SAC avoided millions in potential losses.
Martoma "cultivated and purchased the confidence of doctors with secret knowledge of an experimental Alzheimer's drug, and used it to engage in illegal insider trading," said US Attorney Preet Bharara.
"In the short run, cheating may have been profitable for Martoma, but in the end, it made him a convicted felon," Bharara said.
Martoma's conviction comes about six weeks after separate jury in New York convicted another former SAC portfolio manager, Michael Steinberg, of insider trading in technology stocks. Steinberg will be sentenced in April.
Besides the two criminal convictions, the government has won guilty pleas from six other former SAC employees.
SAC itself agreed to plead guilty and pay $1.8 billion to settle a US criminal case against the firm based on the insider trading allegations.
But SAC and its founder, billionaire Steven A. Cohen, remain under investigation
Cohen also faces a civil suit by the Securities and Exchange Commission, which has sought to bar Cohen from the securities business for poor oversight of employees.