Last Thursday, a jury in the Southern District of New York convicted Mathew Martoma in what is in dollar terms the largest insider trading case in captivity.  As we’ve discussed before, Martoma had been accused of paying a medical professor at the University of Michigan for information related to clinical trials of a potential Alzheimer’s drug and using that information to trade in the securities of Elan Corp. and Wyeth Pharmaceuticals.  The $276 million in losses allegedly avoided here would have made the case interesting all by itself.  What made the case much more interesting and the focus of the white collar criminal world for a time was Martoma’s then-employer and where the trades took place: Steve Cohen’s SAC Capital.

Prosecutors apparently suspected that Martoma told Cohen exactly why his thoughts about Elan and Wyeth had changed so dramatically.  And they dearly hoped Martoma would let them in on that conversation, if it happened.  But if it happened, he never let on.  It turns out his willingness to stand tall didn’t work out, but here we all are.

Now, publications are suggesting that the government is “inching closer” to Steve Cohen and that prosecutors may be “emboldened” to go after the SAC Capital boss in a criminal matter.  It may happen, but I don’t think Martoma’s conviction by itself will do it.

In the recent spate of insider trading cases in the S.D.N.Y., the government has secured 79 convictions.  Say what you will about the Justice Department’s record in financial crisis cases, but Preet Bharara has figured out what it takes to get a jury verdict in insider trading cases.  And the evidence suggests that his office is quite interested in Cohen’s potential insider trading.  But they haven’t brought a case against him personally yet, and a great potential link between Cohen and actual insider trading just endured a conviction rather than testify against his former boss.

There is at least one more potential mini-drama to play out, though.  It is still possible for Martoma to cooperate with the government against Cohen or anybody else.  Under Rule 35(b) of the Federal Rules of Criminal Procedure, prosecutors can move for a reduction in the sentence of a convicted defendant in exchange for “substantial assistance” against co-conspirators or others.  Some judges, when convinced a defendant knows more than he’s told through trial, will test this commitment to principle by imposing wildly long, but legally appropriate, sentences to see if his lips loosen in hopes of a such a motion.  I sort of doubt that will happen here.  Also, Martoma’s cartoonish expulsion from Harvard Law School surely undermines, and probably destroys, his credibility as a witness going forward.  We’ll see what happens over the coming months.