U.S. Appeals Court Rejects Martoma Appeal Of Insider Trading Conviction

Aug 24 2017 | 1:05am ET

A federal appeals court has upheld the conviction of former SAC Capital Advisors portfolio manager Mathew Martoma, handing prosecutors their biggest insider trading win in several years.

Martoma’s argument rested on the contention that improper instructions were given to the jury during his 2014 trial and that the conviction was flawed in light of subsequent rulings such as the December 2014 Newman decision that held something of tangible value must change hands and/or a “meaningfully close personal relationship” must exist between the tipper and the tippee for insider trading to have taken place. 

Martoma was convicted of insider trading in that 2014 trial and is currently serving a nine-year sentence. The government argued that he illicitly made some $275 million for SAC through the use of confidential tips received from a Michigan doctor to trade in Wyeth and Elan Corp. 

The decision was not unanimous. Dissenting the 2-1 decision, Judge Rosemary Pooler said the decision runs counter to specific elements of the Newman decision and to two Supreme Court cases setting limits on insider-trading prosecutions. The dissent means it is likely the issue of Newman’s intentionally vague close relationship standard will be further appealed en banc within the appeals court or to the U.S. Supreme Court.

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