Judge Greenlights Elan-Wyeth Shareholder Suits Against SAC

Aug 15 2014 | 6:34am ET

The former SAC Capital Advisors will have to defend itself against a lawsuit stemming from its insider-trading of two pharmaceutical company stocks.

A federal judge has rejected the firm’s bid to have the lawsuit, filed by investors of Elan Corp. and Wyeth LLC, dismissed. U.S. District Judge Victor Marrero said that “SAC’s arguments are inappropriate at this stage in the proceedings.”

Elan and Wyeth shareholders sued SAC last year, after the firm settled Securities and Exchange Commission allegations over its trading in the shares. Since then, the firm has rolled its Wyeth-Elan settlement into a larger $2 billion settlement that barred it from managing outside capital—it is now a family office known as Point72 Asset Management—and seen the manager responsible for the trades, Mathew Martoma, convicted of fraud.

Marrero also refused to dismiss investor lawsuits against Martoma and Sidney Gilman, a former medical professor who admitted to passing confidential information to the hedge-fund manager. The judge did narrow the lawsuit, throwing out claims that were brought too late.

SAC had argued that the SEC settlement covered its liability in the case, and that “contemporaneous traders are not harmed by insider trading.” But Marrero said the SEC deal does not establish with “scientific truth” what SAC should pay in the case.

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