They say he shared the information with others, enabling more than $276 million to be made illegally for his fund and others. The government said in court papers that he caused other investment advisers to buy shares in the drug companies, and then he and the others ditched their investments before the public found out about the drug trial's disappointing results, allowing them all to make big profits and avoid huge losses.
Court papers in Martoma's case repeatedly allude, without using Cohen's name, to his dealings with Martoma in the lead-up to an announcement about the drug trial.
The FBI subpoenaed SAC and other influential hedge funds in November 2010. Martoma is the fourth person associated with SAC Capital to be arrested on insider trading charges in the last four years.
Cohen has not been charged with any crime. SAC spokesman Jonathan Gasthalter has said the company and Cohen are cooperating with the inquiry and "are confident that they have acted appropriately."