UPDATE 4:57 p.m. EDT: Mathew Martoma has been sentenced to nine years in prison and ordered to pay $9.38 million by a federal judge in New York.
Mathew Martoma, formerly of hedge fund SAC Capital Advisors LP, will be sentenced Monday in New York after being convicted in what prosecutors have called “the most lucrative insider trading scheme in history.” But even more important to the government than seeing Martoma convicted is the possibility he could help prosecutors nail the head of SAC Capital Advisor himself.
Martoma may be the last hope for the Securities and Exchange Commission, which has been trying to obtain evidence that SAC Capital’s founder, Steven Cohen, also participated in insider trading. Having worked closely with Cohen, Martoma may have cooperated with authorities in a bid to negotiate a more lenient sentence.
“The only way the [Martoma] case could affect Mr. Cohen would be if Mr. Martoma had a complete change of heart and agreed to cooperate with the government,” John Coffee, Columbia Law School professor, said to International Business Times.
“He would be the only way. They really can’t indict Mr. Cohen without a witness who can identify him as having passed or shared material,” he said.
But despite the hefty fines, SAC's leader, Steven Cohen, has escaped jail time. The SEC alleged that Cohen “failed reasonably to supervise two of his senior employees, who engaged in insider trading under his watch.”
“He continues to spend his days at his high-tech computer station on the firm’s trading floor, buying and selling stocks, his main passion in life,” according to Bloomberg. He vacations with his family, goes to benefits and art fairs, and sits in the fancy seats at Knicks games.”
Cohen now manages his family firm, Point72 Asset Management, which trades as much as $10 billion of his own money and has at least 800 employees, according to The Wall Street Journal.
Prosecutors have tried again and again to charge Cohen himself but haven’t been able to find any compelling witnesses willing to testify. If Martoma had given testimony against Cohen, he may have been able to lessen his sentence.
“The only thing he’s possibly got to negotiate with is cooperation,” Coffee said.
So far, it seems like he won’t change his mind. But the story isn’t over.
Paul Radvany, a clinical associate professor at Fordham Law School, told IBTimes that it’s possible for defendants to change their mind after sentencing.
“I wouldn’t say it’s common, but it’s not without precedent,” Radvany said. “The higher the sentence, the more incentive he has to cooperate, in the hopes of getting resentenced to a lower sentence.”