SAC Head Trader In Martoma Case Is Villhauer

Nov 29 2012 | 1:30pm ET

The SAC Capital Advisors trading chief who sold the stocks at the center of the insider-trading case engulfing the firm has been identified as Phillipp Villhauer.

Villhauer is not named in the criminal or civil complaints against former SAC portfolio manager Mathew Martoma, who is accused of earning the hedge fund $276 million trading on confidential information about Alzheimers' drug trials. But he is the person referred to as SAC's "head trader" or "senior trader" in court documents, Bloomberg News reports.

The case against Martoma has now spread to SAC itself, which was informed on the day of his arrest that it was likely to face a Securities and Exchange Commission lawsuit. The regulator is also mulling an extension of that lawsuit to include SAC founder Steven Cohen.

According to the complaints, Cohen instructed the firm's trading chief, now identified as Villhauer, to begin selling off its enormous stake in pharmaceuticals company Elan Corp. Martoma, who had previously pushed for a big bullish bet on the company, had now urged Cohen to sell, allegedly after learning bad news about the drug trials. The complaints do not allege that Cohen knew Martoma's recommendation was based on non-public information.

Cohen told Villhauer to sell its Elan shares "in a way so as to not alert anyone else, inside or outside of the hedge fund." Villhauer reportedly used algorithms and dark pools to accomplish the task.

Villhauer, according to the Federal Bureau of Investigation, later e-mailed Cohen to report that his orders were "executed quietly and effectively over a four-day period through algos and darkpools and booked into two firm accounts that have very limited viewing access. This process clearly stopped leakage of info from either in [or] outside the firm and in my viewpoint saved us some slippage."

Villhauer has not been accused of any wrongdoing in the case, and there is nothing inherently illegal about using algorithms or dark pools. But former federal prosecutor Andrew Frisch tells Bloomberg that he likely soon will be.

"If this trader is not a cooperator, he is or soon will be in the government's crosshairs," Frisch said. "The government will see him as either a potential cooperator against others or as a worthy target by himself."

One of the others that authorities would undoubtedly seek dirt on from Villhauer is Cohen, against whom the government has spent years attempting to build a case. The FBI sought Martoma's help in getting Cohen before his arrest, but he refused to cooperate.


In Depth

Q&A: Brevan Howard’s Charlotte Valeur Talks Strategy

Sep 18 2014 | 11:18am ET

Charlotte Valeur chairs the board of Brevan Howard Credit Catalysts, an LSE listed...

Lifestyle

Hedgies Rock Out For Children's Charity

Sep 15 2014 | 8:40am ET

It's that time of year again—when hedgies trade in their spreadsheets for guitars...

Guest Contributor

Volkered: How Financial Sector Reforms are Creating Opportunities for Hedge Funds

Sep 16 2014 | 11:28am ET

New regulations have dramatically curtailed proprietary trading activity in investment...

 

Editor's Note

    Get A Sneak Peak Of The Alpha Pages

    Aug 25 2014 | 11:21am ET

    As many of you know, FINalternatives was recently acquired by the owners of Futures magazine, a firm called The Alpha Pages LLC. Today marks the soft-launch of a new sister site for both publications. As its name suggests, The Alpha Pages will cover all types of alternative investments, going far beyond the more well-known ones such as hedge funds and private equity. Read more…

 

Futures Magazine

September 2014 Cover

The London Whale: Rogue risk management

Credit default swaps brought down the London Whale and cost JPMorgan $6.2 billion. Here is how it happened.

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.