Martoma Case
The allegations against Martoma marked the first time prosecutors linked Cohen to trades at the center of an insider case. Blackstone and other SAC investors are awaiting more news on the criminal case against Martoma, who was arrested on Nov. 20 for playing a key role in what prosecutors called a record- setting insider-trading scheme that netted as much as $276 million in profits and averted losses.
Martoma, 38, who worked at SAC’s CR Intrinsic unit, discussed two drug stocks with Cohen in 2008, advising him to sell shares before bad news about a drug’s prospects was announced, according to the government, which referred to the “hedge-fund owner” in court papers. The five-year statute of limitations covering trading in the shares expires at the end of July. Martoma pleaded not guilty to illegal trading at a court hearing in New York last month. Cohen, 56, hasn’t been accused of any wrongdoing.
“We will use this period of time to evaluate all additional information which becomes available,” said Blackstone’s Rose.
Protecting Clients
Jonathan Gasthalter, a spokesman for SAC, yesterday declined to comment on the new liquidity option. He has previously said that Cohen is confident he has acted appropriately and that SAC continues to cooperate with the government’s inquiry.
Cohen agreed not to pull his money, and the firm updated its fund documents to say it would indemnify clients against disgorgement of illegal profits and legal fees, the people said.
SAC’s main fund returned 2.5 percent in January, after climbing 13 percent last year. SAC has produced average annual gains of about 25 percent since its 1992 inception.
Among the clients saying they would withdraw money are Citigroup Inc.’s private bank, which has about $187 million with the hedge fund, and Societe Generale SA’s Lyxor Asset Management unit.
The government’s insider-trading probe has caused massive redemptions at other multibillion-dollar firms, including Level Global Investors LP, Diamondback Capital Management LLC and FrontPoint Partners LLC, which ultimately liquidated.