The Securities and Exchange Commission says a hedge fund advisory firm, CR Intrinsic Investors, will pay more than $600 million to settle insider-trading charges.

SEC says the company participated in an insider-trading scheme involving a clinical trial for an Alzheimer’s drug that’s being jointly developed by two pharmaceutical companies.

It charged the firm in November 2012, alleging one of the top portfolio managers illegally obtained confidential details about the clinical trial from Dr. Sidney Gilman, who was selected by the pharmaceutical companies to present the final drug trial results to the public.

The settlement was filed recently in federal court in Manhattan, and it’s the largest ever insider trading case. It required CR Intrinsic — an affiliate of S.A.C. Capital Advisors — to pay $274,972,541 in disgorgement, $51,802,381.22 in prejudgment interest. On top of that, it’s been ordered to pay a $274,972,541 penalty.

“The historic monetary sanctions against CR Intrinsic and its affiliates are sharp warning the SEC will hold hedge fund advisory firms and their funds accountable when employees break the law to benefit the firm,” says George S. Canellos, acting director of the SEC’s Division of Enforcement.

Sanjay Wadhwa, senior associate director of the SEC’s New York Regional Office, adds, “A robust culture of compliance and zero tolerance toward employee misconduct can help other firms avoid the severe financial consequences that CR Intrinsic is facing for its misconduct.”

The SEC’s complaint against CR Intrinsic, Martoma, and Dr. Gilman alleged that during phone calls arranged by a New York-based expert network firm that Dr. Gilman moonlighted at as a medical consultant, Gilman tipped Martoma with safety data. It says he also and gave details about negative results in the trial about two weeks before they were made public in July 2008.

SEC adds Martoma and CR Intrinsic then caused several hedge funds to sell more than $960 million in Elan and Wyeth securities in a little more than a week.

In an amended complaint filed recently, the SEC added S.A.C. Capital Advisors, as well as and four hedge funds managed by both, as relief defendants because it says they each received ill-gotten gains from the insider trading scheme.

SEC adds these gains are comprised of profits and avoided losses resulting from trades placed in the hedge fund portfolios that CR Intrinsic and S.A.C. Capital managed, and includes fees S.A.C. Capital received as a result.

The settlement is subject to the approval of Judge Victor Marrero of the U.S. District Court for the Southern District of New York. The settlement would resolve the SEC’s charges against CR Intrinsic and the relief defendants relating to the trades in the securities of Elan and Wyeth between July 21 and July 30, 2008.

The settling parties neither admit nor deny the charges. The settlement does not resolve the charges against Martoma, whose case continues in litigation.

The court previously entered a consent judgment against Dr. Gilman requiring him to pay disgorgement and prejudgment interest, and permanently enjoining him from further violations of the anti-fraud provisions of the federal securities laws.

The SEC’s conbtinuing investigation has been conducted by Charles D. Riely and Amelia A. Cottrell of the SEC’s Market Abuse Unit in New York, as well as Matthew J. Watkins and Neil Hendelman of the New York Regional Office.

The case has been supervised by Sanjay Wadhwa. The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York, the Federal Bureau of Investigation, and the Financial Industry Regulatory Authority (FINRA).

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