(Adds background, court arguments, comment from Martoma lawyer, byline)
By Nate Raymond
NEW YORK, Nov 12 (Reuters) - Mathew Martoma, a former portfolio manager at billionaire Steven A. Cohen’s SAC Capital Advisors LP hedge fund, on Wednesday lost a bid to stay out of prison while he appeals his insider trading conviction.
The 2nd U.S. Circuit Court of Appeals in New York lifted a stay that had enabled Martoma to avoid beginning a nine-year prison sentence for engineering what federal prosecutors called the most lucrative U.S. insider trading scheme ever.
In a brief order, the court also signaled Martoma’s appeal may prove unsuccessful, saying he failed to show it had raised a “substantial question of law or fact.”
Richard Strassberg, a lawyer for Martoma, said he was disappointed in the decision.
U.S. District Judge Paul Gardephe in Manhattan will set a new date for Martoma to report to prison. Martoma, 40, had been expected to report on Monday, but won a stay last week.
A jury in February found Martoma guilty of conspiracy and securities fraud for illegal trading that prosecutors said enabled SAC Capital to make $275 million.
Prosecutors said Martoma received a tip in July 2008 from a physician, Sidney Gilman, about negative trial results for an Alzheimer’s drug being developed by Elan Corp and Wyeth.
With the information, they said, SAC sold its $700 million position in the stocks before the results became known that month.
Elan and Wyeth are now owned by Perrigo Co and Pfizer Inc, respectively.
Eight SAC employees have been convicted or pleaded guilty in a long-running federal insider trading probe.
Last year, SAC agreed to pay $1.8 billion in criminal and civil settlements and to plead guilty to fraud. It has changed its name to Point72 Asset Management and stopped managing outside money.
The 2nd Circuit Court ruled four hours after hearing oral arguments on whether Martoma should stay free pending appeal.
Some judges asked why the jury in Martoma’s trial was prevented from reviewing 2012 testimony in which Cohen told the U.S. Securities and Exchange Commission he had consulted with someone other than Martoma before SAC sold its Wyeth stake.
Paul Clement, Martoma’s appellate lawyer, objected to the exclusion of expert witness testimony that Elan stock had been overvalued when SAC sold it.
The case is U.S. v. Martoma, 2nd U.S. Circuit Court of Appeals, No. 14-3599. (Reporting by Nate Raymond in New York; Editing by James Dalgleish and Jeffrey Benkoe)