CR Intrinsic Agrees to Pay More than $600 Million in Largest-Ever Settlement for Insider Trading Case
summary
CR Intrinsic Investors, an affiliate of S.A.C. Capital Advisors, agreed to pay over $600 million to settle SEC insider trading charges after portfolio manager Mathew Martoma used confidential clinical trial data from Dr. Sidney Gilman to trigger $960 million in illegal securities sales before negative Alzheimer’s drug results were public, though Martoma’s case remains pending.
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CR Intrinsic Investors agreed to pay $601,747,463.22 to settle SEC insider trading charges, comprising $274,972,541 in disgorgement, $51,802,381.22 in prejudgment interest, and a $274,972,541 penalty—the largest ever in an insider trading case. The fraud involved portfolio manager Mathew Martoma, who received non-public safety data from Dr. Sidney Gilman via expert network calls, enabling CR Intrinsic to sell over $960 million in Elan and Wyeth securities before negative Alzheimer’s drug trial results were disclosed in July 2008. The SEC also named S.A.C. Capital Advisors and four CR Intrinsic-managed hedge funds as relief defendants for profiting from the scheme, while Martoma’s case continues in litigation and Gilman previously settled with a court-ordered injunction and disgorgement.
narrative
CR Intrinsic Investors, a hedge fund advisory firm affiliated with S.A.C. Capital Advisors, agreed to pay over $600 million to settle SEC charges of insider trading tied to confidential clinical trial data for an Alzheimer’s drug jointly developed by Elan Corporation and Wyeth. Portfolio manager Mathew Martoma illegally obtained non-public safety data and negative trial results from Dr. Sidney Gilman, a clinical trial consultant who moonlighted for a New York-based expert network, through a series of phone calls in mid-2008. Using this information, CR Intrinsic directed the sale of more than $960 million in Elan and Wyeth securities between July 21 and July 30, 2008, before the results were publicly disclosed, avoiding massive losses and generating illicit gains. The settlement includes $274,972,541 in disgorgement, $51,802,381.22 in prejudgment interest, and a $274,972,541 penalty—the largest ever in an insider trading case—and also names S.A.C. Capital Advisors and four CR Intrinsic-managed hedge funds as relief defendants because they received ill-gotten gains from the trades. The settling parties neither admitted nor denied the allegations, and the settlement resolves only the SEC’s claims against CR Intrinsic and the relief defendants, not Martoma, whose criminal case remains pending in litigation. Dr. Gilman previously entered a consent judgment requiring him to pay disgorgement and prejudgment interest and to be permanently enjoined from future securities law violations. The SEC’s investigation, supported by the U.S. Attorney’s Office, FBI, and FINRA, is ongoing, and the settlement is pending approval by Judge Victor Marrero of the Southern District of New York.
Classified insider-trading(confidence 100%). EDGAR detection: forms 4/3/5/144· recall 81% / precision 19%. detection rule →
Parties
George S. CanellosMathew MartomaSanjay WadhwaSecurities and Exchange Commissionthe sec’s complaintthe sec’s investigationthe securities and exchange commission
Keywords
intrinsicsecinsider tradingsettlementinsidertradinghedge fundagainst intrinsicill-gotten gainsnewpayhedgemartomacapitalagainst
Exhibits & Attached Documents (2)
Extracted insights
Dollar amounts 4
- $960.00M $960 million $100M–$1B
- $600.00M $600 million $100M–$1B
- $274.97M $274,972,541 $100M–$1B
- $51.80M $51,802,381 $10M–$100M
Entities 8
- scheme_term cr intrinsic with insider trading in november 2012
- person George S. Canellos
- person Mathew Martoma
- person Sanjay Wadhwa
- agency Securities and Exchange Commission
- agency the sec’s complaint
- agency the sec’s investigation
- agency the securities and exchange commission
Triples 18
- The Securities and Exchange Commission Announced CR Intrinsic Investors has agreed to pay more than $600 million to settle SEC charges that it participated in an insider trading scheme involving a clinical trial for an Alzheimer’s drug being jointly developed by two pharmaceutical companies
- The SEC Charged CR Intrinsic with insider trading in November 2012
- Mathew Martoma Illegally Obtained Confidential details about the clinical trial from Dr. Sidney Gilman
- Dr. Sidney Gilman Was Selected By the pharmaceutical companies — Elan Corporation and Wyeth — to present the final drug trial results to the public
- The settlement Requires CR Intrinsic — an affiliate of S.A.C. Capital Advisors — to pay $274,972,541 in disgorgement, $51,802,381.22 in prejudgment interest, and a $274,972,541 penalty
- George S. Canellos Said The historic monetary sanctions against CR Intrinsic and its affiliates are sharp warning that the SEC will hold hedge fund advisory firms and their funds accountable when employees break the law to benefit the firm
- Sanjay Wadhwa Added A robust culture of compliance and zero tolerance toward employee misconduct can help other firms avoid the severe financial consequences that CR Intrinsic is facing for its misconduct
- The SEC’s complaint Alleged That during phone calls arranged by a New York-based expert network firm for which Dr. Gilman moonlighted as a medical consultant, he tipped Martoma with safety data and eventually details about negative results in the trial about two weeks before they were made public in July 2008
- Martoma and CR Intrinsic Caused Several hedge funds to sell more than $960 million in Elan and Wyeth securities in a little more than a week
- The SEC Added S.A.C. Capital Advisors and four hedge funds managed by CR Intrinsic and S.A.C. Capital as relief defendants because they each received ill-gotten gains from the insider trading scheme
- The settlement Is Subject To The approval of Judge Victor Marrero of the U.S. District Court for the Southern District of New York
- The settlement Would Resolve The SEC’s charges against CR Intrinsic and the relief defendants relating to the trades in the securities of Elan and Wyeth between July 21 and July 30, 2008
- The settling parties Neither Admit Nor Deny The charges
- The settlement Does Not Resolve The charges against Martoma, whose case continues in litigation
- The court Previously Entered A consent judgment against Dr. Gilman requiring him to pay disgorgement and prejudgment interest, and permanently enjoining him from further violations of the anti-fraud provisions of the federal securities laws
- The SEC’s investigation Has Been Conducted By Charles D. Riely and Amelia A. Cottrell of the SEC’s Market Abuse Unit in New York, and Matthew J. Watkins and Neil Hendelman of the New York Regional Office
- The case Has Been Supervised By Sanjay Wadhwa
- The SEC Appreciates The assistance of the U.S. Attorney’s Office for the Southern District of New York, the Federal Bureau of Investigation, and the Financial Industry Regulatory Authority (FINRA)
PDF (from attached: complaint)
Text layers
Extracted body text (3,772c)
Infographic Full-size (PDF) The Securities and Exchange Commission today announced that Stamford, Conn.-based hedge fund advisory firm CR Intrinsic Investors has agreed to pay more than $600 million to settle SEC charges that it participated in an insider trading scheme involving a clinical trial for an Alzheimer’s drug being jointly developed by two pharmaceutical companies. The SEC charged CR Intrinsic with insider trading in November 2012, alleging that one of the firm’s portfolio managers Mathew Martoma illegally obtained confidential details about the clinical trial from Dr. Sidney Gilman, who was selected by the pharmaceutical companies — Elan Corporation and Wyeth — to present the final drug trial results to the public. The settlement filed today in federal court in Manhattan is the largest ever in an insider trading case, requiring CR Intrinsic — an affiliate of S.A.C. Capital Advisors — to pay $274,972,541 in disgorgement, $51,802,381.22 in prejudgment interest, and a $274,972,541 penalty. “The historic monetary sanctions against CR Intrinsic and its affiliates are sharp warning that the SEC will hold hedge fund advisory firms and their funds accountable when employees break the law to benefit the firm,” said George S. Canellos, Acting Director of the SEC’s Division of Enforcement. Sanjay Wadhwa, Senior Associate Director of the SEC’s New York Regional Office, added, “A robust culture of compliance and zero tolerance toward employee misconduct can help other firms avoid the severe financial consequences that CR Intrinsic is facing for its misconduct.” The SEC’s complaint against CR Intrinsic, Martoma, and Dr. Gilman alleged that during phone calls arranged by a New York-based expert network firm for which Dr. Gilman moonlighted as a medical consultant, he tipped Martoma with safety data and eventually details about negative results in the trial about two weeks before they were made public in July 2008. Martoma and CR Intrinsic then caused several hedge funds to sell more than $960 million in Elan and Wyeth securities in a little more than a week. In an amended complaint filed today, the SEC added S.A.C. Capital Advisors and four hedge funds managed by CR Intrinsic and S.A.C. Capital as relief defendants because they each received ill-gotten gains from the insider trading scheme. These ill-gotten gains are comprised of profits and avoided losses resulting from trades placed in the hedge fund portfolios that CR Intrinsic and S.A.C. Capital managed, and include fees that S.A.C. Capital received as a result of these ill-gotten gains. The settlement is subject to the approval of Judge Victor Marrero of the U.S. District Court for the Southern District of New York. The settlement would resolve the SEC’s charges against CR Intrinsic and the relief defendants relating to the trades in the securities of Elan and Wyeth between July 21 and July 30, 2008. The settling parties neither admit nor deny the charges. The settlement does not resolve the charges against Martoma, whose case continues in litigation. The court previously entered a consent judgment against Dr. Gilman requiring him to pay disgorgement and prejudgment interest, and permanently enjoining him from further violations of the anti-fraud provisions of the federal securities laws. The SEC’s investigation, which is continuing, has been conducted by Charles D. Riely and Amelia A. Cottrell of the SEC’s Market Abuse Unit in New York, and Matthew J. Watkins and Neil Hendelman of the New York Regional Office. The case has been supervised by Sanjay Wadhwa. The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York, the Federal Bureau of Investigation, and the Financial Industry Regulatory Authority (FINRA).
OCR text (3,772c · plain-text · 99% conf)
Infographic Full-size (PDF) The Securities and Exchange Commission today announced that Stamford, Conn.-based hedge fund advisory firm CR Intrinsic Investors has agreed to pay more than $600 million to settle SEC charges that it participated in an insider trading scheme involving a clinical trial for an Alzheimer’s drug being jointly developed by two pharmaceutical companies. The SEC charged CR Intrinsic with insider trading in November 2012, alleging that one of the firm’s portfolio managers Mathew Martoma illegally obtained confidential details about the clinical trial from Dr. Sidney Gilman, who was selected by the pharmaceutical companies — Elan Corporation and Wyeth — to present the final drug trial results to the public. The settlement filed today in federal court in Manhattan is the largest ever in an insider trading case, requiring CR Intrinsic — an affiliate of S.A.C. Capital Advisors — to pay $274,972,541 in disgorgement, $51,802,381.22 in prejudgment interest, and a $274,972,541 penalty. “The historic monetary sanctions against CR Intrinsic and its affiliates are sharp warning that the SEC will hold hedge fund advisory firms and their funds accountable when employees break the law to benefit the firm,” said George S. Canellos, Acting Director of the SEC’s Division of Enforcement. Sanjay Wadhwa, Senior Associate Director of the SEC’s New York Regional Office, added, “A robust culture of compliance and zero tolerance toward employee misconduct can help other firms avoid the severe financial consequences that CR Intrinsic is facing for its misconduct.” The SEC’s complaint against CR Intrinsic, Martoma, and Dr. Gilman alleged that during phone calls arranged by a New York-based expert network firm for which Dr. Gilman moonlighted as a medical consultant, he tipped Martoma with safety data and eventually details about negative results in the trial about two weeks before they were made public in July 2008. Martoma and CR Intrinsic then caused several hedge funds to sell more than $960 million in Elan and Wyeth securities in a little more than a week. In an amended complaint filed today, the SEC added S.A.C. Capital Advisors and four hedge funds managed by CR Intrinsic and S.A.C. Capital as relief defendants because they each received ill-gotten gains from the insider trading scheme. These ill-gotten gains are comprised of profits and avoided losses resulting from trades placed in the hedge fund portfolios that CR Intrinsic and S.A.C. Capital managed, and include fees that S.A.C. Capital received as a result of these ill-gotten gains. The settlement is subject to the approval of Judge Victor Marrero of the U.S. District Court for the Southern District of New York. The settlement would resolve the SEC’s charges against CR Intrinsic and the relief defendants relating to the trades in the securities of Elan and Wyeth between July 21 and July 30, 2008. The settling parties neither admit nor deny the charges. The settlement does not resolve the charges against Martoma, whose case continues in litigation. The court previously entered a consent judgment against Dr. Gilman requiring him to pay disgorgement and prejudgment interest, and permanently enjoining him from further violations of the anti-fraud provisions of the federal securities laws. The SEC’s investigation, which is continuing, has been conducted by Charles D. Riely and Amelia A. Cottrell of the SEC’s Market Abuse Unit in New York, and Matthew J. Watkins and Neil Hendelman of the New York Regional Office. The case has been supervised by Sanjay Wadhwa. The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York, the Federal Bureau of Investigation, and the Financial Industry Regulatory Authority (FINRA).