The U.S. Supreme Court on Monday rejected an appeal by Mathew Martoma, a former portfolio manager for billionaire Steven A. Cohen, challenging a conviction for insider trading.

WASHINGTON: The U.S. Supreme Court on Monday rejected an appeal by Mathew Martoma, a former portfolio manager for billionaire Steven A. Cohen, challenging a conviction for insider trading.

The Supreme Court left in place a June 2018 ruling by the New York-based 2nd U.S. Circuit Court of Appeals, which found there was enough evidence to establish Martoma's guilt despite defective jury instructions in the trial. </s> WASHINGTON (Reuters) - The U.S. Supreme Court on Monday rejected an appeal by Mathew Martoma, a former portfolio manager for billionaire Steven A. Cohen, challenging a conviction for insider trading.

The Supreme Court left in place a June 2018 ruling by the New York-based 2nd U.S. Circuit Court of Appeals, which found there was enough evidence to establish Martoma’s guilt despite defective jury instructions in the trial. </s> Law360 (June 3, 2019, 6:14 PM EDT) -- The U.S. Supreme Court on Monday declined to hear an appeal from former SAC Capital Advisors LP portfolio manager Mathew Martoma, dealing him yet another defeat in his bid to reverse his insider trading conviction. Martoma had asked the high court in January to take a look at the Second Circuit’s decision to uphold his 2014 conviction for trading on insider clinical trial information, arguing that it broke from the Supreme Court’s holding that what an insider gets from tipping someone, not just his intentions toward that person, are key to proving the crime. According to Martoma, the Second Circuit has used...

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TRY LAW360 FREE FOR SEVEN DAYS </s> (Bloomberg) -- The U.S. Supreme Court left intact the insider-trading conviction of former SAC Capital Advisors LP portfolio manager Mathew Martoma, rejecting an appeal that could have undercut efforts to clean up Wall Street.

The justices, without comment Monday, let stand a federal appeals court decision that upheld Martoma’s 2014 conviction for using tips to make $275 million for SAC on trades in two pharmaceutical stocks. Martoma is serving a nine-year sentence in a Miami prison following the largest insider-trading case ever brought against an individual.

White-collar crime experts said the ruling by the New York-based 2nd U.S. Circuit Court of Appeals widened the category of people who can be prosecuted, covering traders who get an inside tip as a gift from an acquaintance or business associate.

Martoma told the Supreme Court the ruling eviscerated the decades-old requirement for proof that the person providing the tip received some sort of personal benefit in return.

“It now suffices for the government to prove that the insider intended to benefit the tippee/outsider,” Martoma argued in his appeal. “That test focuses on the wrong question and radically dilutes the government’s burden.”

Martoma had spurned government requests that he cooperate in its investigation of SAC and its billionaire founder, Steven A. Cohen.

SAC pleaded guilty in 2013 and paid a record $1.8 billion fine to resolve U.S. claims over insider trading. It changed its name to Point72 Asset Management LP and agreed to manage only Cohen’s money.

The Supreme Court unanimously ruled in 2016 that people can be sent to prison even when the insider who provided the tip wasn’t trying to make money. That case involved an investment banker who gave information to his brother.

In Martoma’s case, the 2nd Circuit said it didn’t matter how close the relationship was between the two people, as long as the tipper had an “intent to benefit” the recipient.

The Trump administration urged the Supreme Court to reject the appeal without a hearing, saying Martoma’s conviction didn’t depend on the “intent to benefit” standard.

The government said Martoma got confidential information about a clinical trial on an experimental Alzheimer’s drug from a doctor to whom the trader had previously paid more than $70,000 in consulting fees.

Martoma’s “corrupt quid pro quo arrangement fell within the heartland” of prohibitions in the federal securities laws, the administration argued.

To contact the reporter on this story: Greg Stohr in Washington at gstohr@bloomberg.net

To contact the editors responsible for this story: Joe Sobczyk at jsobczyk@bloomberg.net, Laurie Asséo, Ros Krasny </s> An appeal from Mathew Martoma, a former portfolio manager at Steven A. Cohen’s SAC Capital who was convicted of insider trading, was denied by the Supreme Court on Monday.

The hedge fund manager was hoping to have his insider trading conviction overturned, but the High Court upheld a prior ruling that there was enough evidence to establish his guilt, despite claims that the jury was improperly instructed, as reported by Reuters.

At the heart of the appeal was what needs to be proven in order to find someone guilty of insider trading. Martoma, who allegedly received insider tips from a doctor who was also a friend, and his lawyers attempted to argue based on prior precedent that the tip needed to come from someone with whom he had a “meaningfully close personal relationship.” They also claimed there was not enough evidence to prove that the tips were given in exchange for a tangible reward.

He is said to have paid one doctor $1,000 a meeting.

He is serving a nine year prison sentence.

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Martoma allegedly made $275 million in illegal profits by using confidential information about an Alzheimer’s drug. It is considered one of the most lucrative insider trading schemes.

SAC Capital, which has since been renamed Point72 Asset Management, pleaded guilty to insider trading-related violations in 2013 and paid a penalty worth $1.2 billion. </s> FILE PHOTO: Former SAC Capital Advisors portfolio manager Mathew Martoma exits the U.S. District Court for the Southern District of New York, following sentencing for insider trading, in Lower Manhattan September 8, 2014. REUTERS/Brendan McDermid FILE PHOTO: Former SAC Capital Advisors portfolio manager Mathew Martoma exits the U.S. District Court for the Southern District of New York, following sentencing for insider trading, in Lower Manhattan September 8, 2014. REUTERS/Brendan McDermid

WASHINGTON (Reuters) – The U.S. Supreme Court on Monday rejected an appeal by Mathew Martoma, a former portfolio manager for billionaire Steven A. Cohen, challenging a conviction for insider trading.

The Supreme Court left in place a June 2018 ruling by the New York-based 2nd U.S. Circuit Court of Appeals, which found there was enough evidence to establish Martoma’s guilt despite defective jury instructions in the trial. </s> FILE PHOTO: Former SAC Capital Advisors portfolio manager Mathew Martoma exits the U.S. District Court for the Southern District of New York, following sentencing for insider trading, in Lower Manhattan September 8, 2014. REUTERS/Brendan McDermid

WASHINGTON (Reuters) - The U.S. Supreme Court on Monday rejected an appeal by Mathew Martoma, a former portfolio manager for billionaire Steven A. Cohen, challenging a conviction for insider trading.

The Supreme Court left in place a June 2018 ruling by the New York-based 2nd U.S. Circuit Court of Appeals, which found there was enough evidence to establish Martoma’s guilt despite defective jury instructions in the trial. Martoma had worked at the CR Intrinsic Investors unit of Cohen’s SAC Capital Advisors LP.

At issue in the appeal was whether the prosecution must prove insider trading by showing that the individual who supplied a tip sought personal gain or intended to confer a benefit to someone else.

The 2nd Circuit had upheld Martoma’s conviction and nine-year prison term in August 2017, but in a modified ruling almost a year later withdrew its prior finding that the jury instructions were “not obviously erroneous.”

The appeals court decided that the instructions wrongly allowed a conviction solely on evidence that a Michigan doctor had tipped Martoma about a Alzheimer’s drug trial to maintain a friendship, rather than to offer a benefit or further a “quid pro quo” relationship - something done in exchange for something else.

Martoma was convicted in February 2014 for making $275 million of illegal gains in Elan Corp and Wyeth. Now called Point72 Asset Management LP, SAC pleaded guilty to fraud and paid $1.8 billion in U.S. criminal and civil settlements. Cohen was not criminally charged. </s> WASHINGTON – A unanimous Supreme Court is siding with the government in a legal clash over the nation's insider trading laws. It's a victory for prosecutors seeking to curb corruption on Wall Street.

The justices ruled Tuesday that sharing corporate secrets with friends or relatives is illegal even if the insider providing the tip doesn't receive anything of value in return.

The ruling upheld the conviction of Bassam Yacoub Salman, an Illinois man convicted of making investments based on inside information he received from a member of his extended family.

The court rejected arguments that insider trading prosecutions should be limited to those who make secret profits from revealing confidential data. Government officials say sharing corporate secrets with friends or family is just as damaging to the integrity of financial markets. </s> Bassam Salman, a Chicago grocery wholesaler, received stock tips from a friend, who had in turn received inside information from Salman’s brother-in-law, an investment banker at Citigroup. Salman made hundreds of thousands of dollars from the tips, but he was also charged with insider trading and sentenced to three years in prison. Today the Supreme Court upheld Salman’s conviction, rejecting his argument that he could not be held liable because his brother-in-law had not received any financial benefits in exchange for the inside information that he disclosed. The unanimous ruling – which came just over two months after the oral argument – was a big victory for the federal government, which had warned the justices that a ruling for Salman would lead to even more disclosures of confidential information by corporate insiders.

In a 1983 case, Dirks v. SEC, the Supreme Court ruled that a “tippee” – someone who receives confidential information from an insider and then uses the information to trade – can be held liable under insider trading laws when the insider violates his duty to shareholders by disclosing the information, which in turn depends on whether the insider receives “a direct or indirect personal benefit from the disclosure.” The court in that case noted that jurors could infer a “personal benefit” when the insider either receives something of value in exchange for the tip or “makes a gift of confidential information to a trading relative or friend.”

In Salman’s case, the U.S. Court of Appeals for the 9th Circuit ruled that, following Dirks, the jury that convicted Salman could infer that Salman’s brother-in-law, Maher Kara, had breached his duty when he passed confidential information to his brother Michael, who then relayed it to Salman. In fact, the lower court ruled, Maher’s disclosures to Michael were “precisely the gift of confidential information to a trading relative that Dirks envisioned.”

The 9th Circuit’s application of Dirks to Salman’s case, the justices held today, was proper, although the justices took care to make clear that the issue presented by this specific case was a “narrow” one. Dirks, the court explained in an opinion by Justice Samuel Alito, “makes clear that a tipper breaches a fiduciary duty by making a gift of confidential information to ‘a trading relative.’” This is so, the court continued, because “giving a gift of trading information is the same thing as trading by the tipper followed by a gift of the proceeds.” Here, the court reasoned, Maher Kara breached his duty of trust and confidence to Citigroup when he gave information to his brother, Michael, knowing that Michael would trade on it; Salman then inherited that duty and breached it when he traded on the confidential information.

The court rebuffed Salman’s contention, based on a recent decision by the U.S. Court of Appeals for the 2nd Circuit, that the insider must “also receive something of a ‘pecuniary or similarly valuable nature’ in exchange for a gift” of confidential information to family or friends. Such a requirement, the court emphasized, is “inconsistent with Dirks.” The court acknowledged that “many insider-trading cases” “involved insiders who personally profited through the misuse of trading information.” But the court seemed to attribute that fact to happenstance; it does not, the court stressed, change the test that the court “articulated and applied” in Dirks.

The court also agreed with Salman that, at least in some cases, it may be hard to determine whether an insider received a “personal benefit” from disclosing confidential information. But those hypothetical difficulties, the court emphasized, do not necessarily make the insider-trading laws so ambiguous that they violate the Constitution and require the court to overturn Salman’s conviction. Although the court left open the possibility that it might need to address that “difficult” scenario in a future case, it saw no need to do so here, because Salman’s conduct falls within the “heartland” of the conduct envisioned by Dirks.

Today’s ruling means that Salman’s conviction will stand. To a certain extent, the unanimous opinion’s relative brevity – just 12 pages – and the speed with which the eight-member court issued its decision belie the significance of the ruling. By rejecting the 2nd Circuit’s “pecuniary gain” requirement and making clear that conduct like Salman’s falls squarely within the insider-trading laws, the court took an important step in its first ruling in an insider-trading case in two decades.

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Recommended Citation: Amy Howe, Opinion analysis: Court upholds “friends and family” insider-trading conviction, SCOTUSblog (Dec. 6, 2016, 12:01 PM), https://www.scotusblog.com/2016/12/opinion-analysis-court-upholds-friends-and-family-insider-trading-conviction/
Insider trading. The US Supreme Court refused to take an appeal from the US Court of Appeals for the Second Circuit decision. The 'denial of cert' leaves standing the conviction of Mathew Martomo on charges of insider trading. on information leaked to him from representatives of two major pharmaceutical companies.