NEW YORK (Bloomberg) - Steven Cohen’s SAC Capital Advisors is at the centre of the biggest insider case ever filed in a sweeping US crackdown on illicit hedge fund trading - one that focuses on the burgeoning exploitation of secret information on volatile health care stocks.In doing so, the new case against a former Cohen lieutenant has brought the five-year probe beyond the realm of technology stocks and into the busy underworld of health care industry securities fraud. The charges against former SAC portfolio manager Mathew Martoma also place US prosecutors closer than ever to Cohen, the hedge fund’s billionaire owner and founder, in the broadest probe of insider trading in a generation.Martoma, 38, was accused by prosecutors in Manhattan federal court with playing a lead role in what they called the most lucrative insider-trading scheme in history, given the $276 million profit he allegedly helped the hedge fund achieve. Martoma participated in trading on insider tips about clinical trials of a drug to treat Alzheimer’s disease, the US said, and advised Cohen to sell shares of Wyeth and Elan before bad news about its prospects was announced. The government referred to the “hedge-fund owner” in court papers.“It appears that the government is sending the message that they believe the owner of the hedge fund is acting alongside Mr Martoma,” Brad Simon, a former federal prosecutor now in private practice in New York, said in a phone interview. “This would indicate to me that the government’s investigation is moving up the chain at a very rapid pace.”Health-care businesses offer illegal traders more opportunities to profit than the finance and technology sectors that have traditionally been prime victims of insiders who leaked confidential data about earnings or deals.Health companies can live or die on the results of drug trials, which stretch for years before regulators make decisions that can trigger hundreds of millions of dollars in profits or losses. And the industry has undergone significant consolidation, leading to several multibillion-dollar mergers.More than 80 people have been sued by regulators or charged by prosecutors since 2008 for passing or getting inside tips about pharmaceutical, biotechnology or other health-care stocks.The line-up of accused health-industry insider traders includes chief executive officers, hedge fund traders, bankers, lawyers, doctors, accountants, a retired commercial airline pilot, a film producer and a member of Major League Baseball’s Hall of Fame. It has touched the FDA and large health-care companies such as Bristol-Myers Squibb and Abbott Laboratories.Martoma, according to prosecutors, urged Cohen to buy Wyeth and Elan shares based on good news about the Alzheimer’s drug trial, then advised him to liquidate SAC’s $700 million position after getting a secret tip that the trial had gone badly.Cohen’s firm made huge profits or avoided losses after receiving the advice from Martoma to sell Wyeth and Elan shares, prosecutors said in the complaint. Martoma is charged with conspiracy and securities fraud, which carries a maximum 20-year prison term. Prosecutors don’t say in the complaint whether Cohen knew Martoma’s advice was based on illegal tips. Neither Cohen nor SAC Capital was charged or sued over the matter.The US may be seeking to persuade Martoma to assist in a probe of others at SAC, said Andrew Frisch, a defence attorney in New York and former federal prosecutor.“That they’re proceeding by a complaint, as opposed to an indictment, often means the government wants to convince the defendant of the wisdom of cooperation,” Frisch, who isn’t involved in the case, said in an interview. “Cooperation is always a possibility for a defendant, but it’s a question of whether he has information.“Perhaps the government is in plea negotiations and by having a criminal complaint this buys him more time,” Simon said. “With a criminal complaint they don’t have to use a grand jury, this gives them more flexibility, they can work out a plea and avoid the entire grand jury process. It doesn’t lock the government in.”Martoma is the latest current or former SAC employee implicated in alleged insider trading by US prosecutors, including former portfolio managers Noah Freeman and Donald Longueuil and analyst Jon Horvath.Cohen, 56, started SAC Capital in 1992 and his hedge fund manages $14 billion. He has been deposed by SEC investigators about trades made close to news such as mergers and earnings that generated profit for his fund, a person familiar with the matter said in June.“Mr Cohen and SAC are confident that they have acted appropriately and will continue to cooperate with the government’s inquiry,” Jonathan Gasthalter, a company spokesman, said.