Former SAC Capital employee Mathew Martoma has pleaded not guilty to insider trading charges on Thursday (January 3) at his arraignment at a federal courthouse in New York.

He is accused of using inside information to generate profits and avoid losses totaling $276 million (USD) in shares of two drug stocks Elan Corp PLC and Wyeth.

The criminal complaint filed by federal prosecutors and a related civil lawsuit filed by the SEC contend Martoma got insider information from a doctor who is not named in the criminal complaint because he is now cooperating with prosecutors after agreeing to pay a $186,781 disgorgement.

The SEC complaint identifies the doctor as Sidney Gilman, who leaked secret information from an Alzheimer's disease drug trial.

Gilman is an 80-year old neurology professor at the University of Michigan.

The charges against Martoma stem from the U.S. government's long-running investigation of improper trading in the $2 trillion hedge fund industry, which the Federal Bureau of Investigation has called Operation Perfect Hedge.

The 38-year-old Martoma is scheduled to reappear in court on March 5.

-Reuters