Mathew Martoma, a former portfolio manager of SAC Capital Advisors was found guilty of insider trading charges by a federal jury in Manhattan on Thursday.

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The federal jury, composed of seven women and five men, were convinced that Martoma helped SAC Capital Advisors, the hedge fund controlled by billionaire investor, Steven Cohen to make millions in profits illegally by trading the shares of Elan Corporation, plc (NYSE:ELN) and Wyeth Limited (BOM:500095) (NSE:WYETH) using confidential information related to a clinical trial for an experimental drug for the treatment of Alzheimer’s disease.

Martoma obtained confidential information from a doctor familiar with the results of the clinical trial. The doctor was that main witness of the government in the insider trading case against the former SAC trader. The inside information allowed SAC Capital to prevent losses and generate $275 million in profits in July 2008.

Martoma is expected to serve 10 years in prison. He is the eighth person who previously worked at SAC Capital that either was convicted or pleaded guilty to conspiracy and securities fraud charges filed by the United States Department of Justice (DOJ) and the Securities and Exchange Commission (SEC).

Witness testimony

During the trial, Sidney Gilman, former professor at the University of Michigan Medical School testified that he was charmed by Martoma and gave him confidential results of the clinical trial for the Alzheimer’s drug sponsored by Elan Corporation, plc (NYSE:ELN) and Wyeth Limited (BOM:500095) (NSE:WYETH) two weeks before announcing it to the public.

According to Gilman, he received more than $1 million from Martoma for consultations over several years. He added that he cannot remember giving similar information to any other trader, but he said, “perhaps unintentionally … may have slipped here and there.”

Assistant U.S. Attorney Arlo Devlin-Brown emphasized during the trial that Martoma sent an e-mail to Cohen asking, “Is there a good time to catch up with you this morning? It’s important,” immediately after his consultation with Gilman. Martoma and Cohen spoke over the phone, 30 minutes after sending that e-mail.

Devlin-Brown said, the following day Martoma and SAC Capital started selling all of its stockholdings in Elan Corporation, plc (NYSE:ELN) and Wyeth Limited, and started building a short position and made millions of profits when the stock went down after the public announcement of the results of the clinical trial for the drug. Martoma received a $9.3 million bonus after Sac Capital gained $275 million from the trades.

Guilty verdict another setback for SAC Capital’s Cohen

The New York Times indicated that the guilty verdict on Martoma is another setback for Cohen. Last year, SAC Capital pleaded guilty to the insider trading case filed against it and agreed to pay a penalty of $1.2 billion. The hedge fund also agreed to sell its reinsurance unit to end the criminal case filed against it.

Cohen is still facing a civil administrative case filed by SEC for allegedly failing to supervise his employees related to the insider trading charges. Federal authorities are still continuing their investigation on alleged insider trading conducted by SAC Capital in several other equities. No other impending criminal charges filed against the hedge fund or current employees.

But the defense countered that the information Dr. Gilman provided was already publicly known and brought forward analysts at other financial firms who testified that Dr. Gilman gave them similar information.