Mathew Martoma was charged with insider trading today. “This is an insider trading case where affiliated investment advisers and their hedge funds made over $276 million in illegal profits or avoided losses in July 2008 by trading ahead of a negative public announcement involving the clinical trial results for an Alzheimer’s drug being jointly developed by Elan Corporation, plc (“Elan”) and Wyeth,” SEC says in its complaint.
SEC alleges that Dr. Sidney Gilman provided confidential information to Mathew Martoma who then “caused hedge fund portfolios managed by CR Intrinsic as well as hedge fund portfolios managed by an affiliated investment adviser (“Investment Adviser A”) not only to liquidate their combined long positions in Elan and Wyeth, worth over $700 million, but also to take substantial short positions, eventually selling over $960 million in Elan Corporation (NYSE:ELN) and Wyeth securities in just over a week”
Who is “Investment Advisor A”? You may think that it is Steven Cohen’s SAC Capital but our database came up with different potential names. We searched for hedge funds that both owned Elan Corp (NYSE:ELN) and Wyeth at the end of June 2008 and sold their holdings by the end of September 2008. Our 13F database brought the following 5 hedge funds that did that (this doesn’t mean that they engaged in illegal insider trading though, however SEC should nevertheless have checked whether they had any connections):
1. Carlyle-Blue Wave Partners Management (see filings)
2. CR Intrinsic: you already know about this
3. Parallax Fund: see filings
5. Trellus Management Company: see filings
Again, this doesn’t mean that any of these hedge funds were engaged in illegal insider trading. There are hundreds of hedge funds buying and selling stocks. Some of these hedge funds may coincidentally sell these stocks at around the same time Mathew Martoma did.