Steve Cohen And Mathew Martoma Will Probably Sleep Better Tonight
Last fall Martoma, a former portfolio manager at a subsidiary of Steve Cohen's hedge fund SAC Capital, was accused of using an expert to get inside information on two pharmaceutical companies, Elan and Wyeth. According to authorities, Martoma then advised SAC to trade on that information, and Steve Cohen (mentioned in the complaint as 'Portfolio Manager A') knew it.
The problem with those allegations now, says Dealbook, is that SAC may not have had the exposure to those pharmaceutical companies that authorities allege it did.
From Dealbook (emphasis ours):
Internal SAC trading records, according to people directly involved in the case, indicate that the hedge fund did not have a negative bet in place in advance of the announcement of the drug trial’s disappointing results. Instead, the records indicated that SAC, through a series of trades, including a complex transaction known as an equity swap, had virtually no exposure — neither long nor short — heading into the disclosure of the drug data.
A different narrative surrounding the firm’s trading could help Mr. Martoma, who has pleaded not guilty to securities fraud and conspiracy in what the government calls the most lucrative insider trading case ever charged...
Still, perhaps more important, the trading records may complicate a government effort to pursue a case against Mr. Cohen. The SAC founder has not been accused of any wrongdoing, and has said he acted appropriately at all times.
A few more things that are making this case complicated — Martoma has yet to cooperate with the government, the statute of limitations on this case is closing in (this all happened back in 2008), and it simply isn't that weird for a hedge fund of SAC's size and sophistication to get in and out of big positions quickly.