Today a New York judge approved the massive $602 million
settlement that would resolve the insider trading scandal
involving SAC Capital Advisors and Mathew Martoma. Judge Victor
Marrero made a statement agreeing that the settlement payment is
fair. He also claimed that he is “troubled” by the fact that CR
Intrinsic Investors, the fund associated with Guru
and SAC Capital, were simply able to write a check and be done
with the whole ordeal even though they were never required to
admit or deny their involvement in illegal insider trading.
“In this court’s view, it is both counterintuitive and
incongruous for defendants in this SEC enforcement action to
agree to settle a case for $600 million that would cost a
fraction of that amount, say $1 million, to litigate, while
simultaneously declining to admit the allegations asserted
against it by the SEC,” Judge Marrero wrote. The judge also added
that CR Intrinsic “essentially folded” as long as the SEC would
not make them admit their guilt.
SAC Capital clearly admitted their guilt by agreeing to the over
$600 million settlement in March. It is the largest illegal
insider trading settlement to date.
The Securities and Exchange Commission (SEC) has reported that
they are currently reviewing Judge Marrero’s verdict.
The SEC initially charged a subsidiary of SAC Capital and its
former manager, Mathew Martoma, of an insider trading scheme
involving an Alzheimer’s medicine being jointly developed by two
different pharmaceutical companies. According to the SEC, Martoma
illegally obtained confidential details about the clinical trial
surrounding the drug. Martoma discovered that the clinical trial
results turned up negative through Dr. Sidney Gilman, the
chairman of the safety monitoring committee overseeing the
clinical trial. Gilman has already agreed to pay over $234,000 in
disgorgement and pre-judgment.
Since investigating the firm, the government has found at least
eight current or former SAC employees linked to allegations of
illegal insider trading while working for the hedge fund.
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