Insider-trading suspect remains free on bail

NEW YORK -- A former hedge fund manager will remain free while he decides whether to cooperate with the government or fight what prosecutors have called the biggest-ever insider-trading case.

A federal judge in Manhattan allowed Mathew Martoma, who managed a portfolio for a unit of hedge-fund giant SAC Capital Advisors, to remain free on a $5-million bond Monday while the case continues.

Federal prosecutors last week accused Martoma, 38, of illegally trading on secret information he received from a doctor overseeing key tests for a drug under development to treat Alzheimer’s disease.

Authorities say Martoma’s alleged illicit trading earned his former firm $276 million in profit and avoided losses from 2006 to 2008.

Martoma allegedly persuaded his former boss to load up on stock of two pharmaceutical companies developing the drug, then abruptly shifted course when test results cast serious doubt on the drug’s effectiveness.

While court documents do not explicitly identify the hedge fund or Martoma’s boss, media reports have identified Steve Cohen, who founded and runs SAC Capital, as the unnamed hedge fund executive mentioned in the documents as being involved in trading decisions in question. Cohen has not been accused of any wrongdoing and an SAC spokesman has said he has acted appropriately.

Martoma’s attorney has said his client will be exonerated. He was arrested at his home in Florida last week.

Martoma’s bail required three co-signers, and restricts his movements to New York, New Jersey, Florida and Massachusetts. The $5-million bond must be secured by $2 million in cash or property.

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