The U.S. Securities and Exchange Commission is asking a district judge to authorize a fair fund to pay back people shareholders who didn't participate in an insider trading scam involving shares of Wyeth LLC and Elan Corp. PLC. The regulator is seeking to reimburse people who traded the stocks over a seven-day period in July 2008, which is the week when SAC Capital Advisors LP liquidated a $700 million position in both companies because of illicit tips obtained by former fund manager Mathew Martoma. The SEC is suggesting that the $602 million it collected from SAC Capital over the matter should be used to repay the shareholders.
SAC Capital, now known as Asset Management LP, had agreed to pay $1.8 billion to settle a criminal indictment for the insider trading allegations. Of that money, $616 million was a penalty to the SEC over related charges. However, not all SEC commissioners are on board with the regulator’s fair fund recommendation. Commissioners Michael Piwowar and Daniel Gallagher have expressed their dissent.
Meantime, Martoma has just lost a bid to stay out of jail while he appeals his conviction. Martoma was sentenced to nine years behind bars after he was found guilty of three counts of conspiracy and securities fraud.
He is accused of getting the confidential data from doctors involved in a clinic trial of an Alzheimer’s drug that both Wyeth and Elan were developing. Estimated ill-gotten gains in the insider trading scheme is about $275 million.
The illegal trades occurred between 2006 and 2008. SAC took most of the gains. Several other SAC capital employees also were convicted for insider trading.
At Shepherd Smith Edwards and Kantas, LTD LLP, our securities fraud lawyers are here to help investors. Over the years, we have helped thousands of clients, including institutional investors and individual investors, recoup their fraud losses.
SEC Has SAC Capital Idea: Give Insider Fines to Victims, Bloomberg, November 15, 2014
Casting Doubt on Appeal, Court Rejects Bail for Ex-SAC Capital Trader, The New York Times, November 12, 2014
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