Feds: Merritt Island High grad an inside trader

Mathew Martoma, also known as Ajai Mathew Thomas, arrested in Florida

MERRITT ISLAND, Fla. - A man who graduated from Merritt Island High School in 1992 has been indicted in an insider-trading case that one U.S. attorney said "might be the most lucrative inside tip of all time."

Mathew Martoma — known as Ajai Mathew Thomas when he lived in Brevard County — has been charged with two counts of securities fraud and a related conspiracy charge.

Federal prosecutors allege Martoma, a former hedge fund portfolio manager, persuaded a medical professor to reveal secret data from an Alzheimer's disease drug trial, Local 6 News partner Florida Today reported.

They say that allowed Martoma to engineer a record-setting insider-trading scheme that reaped more than a quarter-billion dollars in illegal profits.

The FBI arrested Martoma on Nov. 20 at his Palm Beach County home.

His lawyer says there was no misuse of secret information. Martoma could not be reached for comment.

The arrest has surprised and puzzled some academics who knew Martoma before he aligned himself with a billionaire, SAC Capital Advisors hedge fund owner Steven A. Cohen.

They say the criminal behavior prosecutors allege doesn't match their memories of an intelligent, ambitious and idealistic young scholar.

"It's sort of a tragic story it seems to me, if there's any truth to it," said Ronald Green, Martoma's supervisor at the National Institutes of Health in the late 1990s, and a Dartmouth College religion professor who directs the school's Ethics Institute.

Martoma began a four-year stint in 2006 with Connecticut-based SAC affiliate CR Intrinsic Investors LLC, first as an analyst and then as a hedge fund portfolio manager specializing in the health care sector.

Martoma's arrest marked the fourth time authorities have arrested someone from SAC on insider trading charges in the past four years.

A company spokesman has said the company and its owner "acted appropriately" and will cooperate with the government's probe.

Prosecutors say Martoma began meeting with University of Michigan medical professor Sidney Gilman in 2006 through an expert consulting service in New York City. They say that between then and 2008, the physician leaked Martoma confidential information about a joint drug trial by pharmaceutical companies Elan and Wyeth.

Gilman's lawyer has said his client is cooperating with authorities and has reached a non-prosecution agreement with federal officials.

With the secret data, prosecutors say, Martoma caused other investment advisers to at first buy shares in the drug companies, then ditch them and place financial bets against the companies when he found out before the public that the drug trial's final outcome was negative.

Authorities say Martoma made $9 million in bonus pay for the year when the trades were made.

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