Wall Street’s riskiest trade
Mathew Martoma, a former hedge fund portfolio manager, was not a particularly good trader, according to an email sent by one of his colleagues that has been released by federal prosecutors in Manhattan. One of billionaire hedge fund manager Steve Cohen’s employees recommended Martoma be fired in 2010 after Martoma continually lost money, adding that Martoma appeared to be “a one trick pony.”
But now Martoma is making the riskiest trade of his life. He is betting against federal prosecutors in Manhattan, essentially shorting the criminal insider-trading case that has been made against him by Preet Bharara, the U.S. Attorney in Manhattan. It’s an exceptionally high risk bet.
On Thursday Martoma showed up in a Manhattan court and pleaded not guilty to the federal charges that have been filed against him. He has repeatedly refused to cooperate with federal agents investigating Cohen, his former boss and head of SAC Capital and its affiliates, the big hedge fund firm where Martoma used to work. Instead of negotiating a plea deal before he was indicted that would have potentially seen him serve little or maybe even no jail time, Martoma has insisted on his innocence and is signaling that he is going to fight the charges. If he loses, Martoma could face years in jail, potentially up to 45 years, for his involvement in what federal prosecutors call the biggest insider trading case ever.
The odds are overwhelmingly not in Martoma’s favor. Since Bharara was sworn in as Manhattan’s U.S. Attorney, he has charged 76 individuals with insider trading, 71 of them have been convicted. Martoma is among four other remaining individuals who have been charged in the last six weeks. Another man is currently a fugitive. Among the fallen: former hedge fund billionaire Raj Rajaratnam, currently serving an 11 year sentence, and former Goldman Sachs board member Rajat Gupta.
Martoma is also going up against a federal prosecutor who has experience with well-funded defendants who try to fight back. Arlo Devlin-Brown, the assistant U.S. attorney leading the prosecution of Martoma, stared down the incredibly rich online poker industry in the last few years even though it was not completely clear whether federal laws even barred online poker in America–a legal question that does not apply to insider trading. Nevertheless, Devlin-Brown virtually shut down the online poker market in America, helped the government claim hundreds of millions of dollars, and led a prosecution that has seen seven of 11 indicted men convicted, with one case still pending and the other men remaining at large. The key moment in the case occurred when two online poker payment processors mounted an unexpected defense championed by former U.S. Solicitor General Paul Clement, but after a federal judge seemed much more sympathetic to Devlin-Brown’s argument, the companies and individuals all folded.
A spokesman for Cohen and SAC Capital has said both acted appropriately at all times. Charles Stillman, Martoma’s lawyer, has said Martoma did not trade on insider information and will ultimately be vindicated.
this is a follow up to the steve cohen story i did previously..seems he has quite a hold on martoma..the guy could have gotten off almost for spilling his guts but instead may face a long sentence for standing by his man..