The wheels of justice turn slowly. Too slowly, it turns out, for Mathew Martoma. Like others thrown in prison by Preet Bharara, the former SAC Capital Advisors analyst thought he was in the clear when the Second Circuit Court of Appeals—the very same federal court that would hear his own appeal—ruled that Preet Bharara’s interpretation of insider-trading was perhaps a tad broad, and that one couldn’t really insider-trade in the absence of a “meaningfully close personal relationship.” And after all, could a $1,000 an hour consulting arrangement really qualify as a “meaningfully close personal relationship”? Martoma and his lawyers didn’t think so.
Unfortunately for Martoma, he and his lawyers took a long time coming up with losing arguments for why he shouldn’t spend so much time in jail, but not long enough for the Newman decision to come down before he was actually in jail. Still, his lawyers actually made it to the Second Circuit to make the case that there is no such thing as insider trading anymore, but then while it was taking its time to consider those arguments, the Supreme Court stepped in and redefined insider-trading itself. So the Second Circuit said Martoma had to come up with some new arguments. Unfortunately, Martoma’s lawyers didn’t know that the Second Circuit had decided the Supreme Court decision in Salman meant that Newmandidn’t count anymore.
”We respectfully conclude that Salman fundamentally altered the analysis underlying Newman’s ‘meaningfully close personal relationship’ requirement such that the ‘meaningfully close personal relationship’ requirement is no longer good law,” a majority said in the Martoma case….
“Now we’re saying, it’s not just providing a gift of inside info to a friend or relative that is illegal but it is providing a gift of info to anybody knowing they are going to trade that is illegal,” Mr. Holwell said, adding, “It is a very substantial broadening of insider trading laws.”
So it’s not just bad news for Matt; it’s bad news for everybody. (Assuming this latest interpretation of the latest interpretation of what is and isn’t insider-trading holds up for more than a few months.) And that includes Steve Cohen, who still has to explain to skeptical foreigners why they should trust him when the guy who orchestrated the most lucrative insider-trading scheme in history under his roof is in prison for another four years.