Martoma, 38, was arrested in December on charges of using material, non-public information he received from a doctor on the clinical trial of an Alzheimer's disease drug to make profits and avoid losses for his hedge fund in an amount totaling USD 276 million.
"I plead not guilty, Your Honor," Martoma said at a brief arraignment hearing in Manhattan federal court.
He faces a maximum penalty of 45 years in prison and a USD five million fine.
Matorma's wife and parents also attended the hearing crowded by media persons, according to Wall Street Journal.
The former hedge-fund manager at an affiliate of Steven A Cohen's SAC Capital Advisors LP has refused to become a cooperating witness in the investigation.
The paper said he had fainted in the front yard of his Florida home after he was first approached by federal agents in late 2011, but refused to cooperate.
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The professor, who was on a committee overseeing the safety of the clinical trial at the centre of the case, is cooperating with the government.
"Mathew Martoma is an innocent man," his lawyer Charles Stillman said.
He said his client has not had any plea discussions with prosecutors since he was originally charged.
Matorma was released on a USD 5 million bail after he appeared in Manhattan federal court for an initial hearing in November. A federal grand jury indicted Martoma on securities fraud and conspiracy charges last month.
A Stanford University graduate, Martoma is the son of Indian immigrants and was born Ajai Mathew Mariamdani Thomas. He later changed his name in 2003.
The US Securities and Exchange Commission has also filed a civil insider trading case against him on similar charges.
He had worked with CR Intrinsic Investors, an affiliate of SAC Capital Advisors. SAC is owned by hedge fund titan Steven Cohen, who is among one of the world's richest men.