Moffat previously headed up the vendor's Systems and Technology Group, which posted revenue of $19.3bn (£11.6bn) last year, almost a fifth of IBM's overall total. He has been with the firm for more than 30 years and industry onlookers had picked him out as a possible successor to incumbent chief executive Sam Palmisano.
Moffat, who is now out on bail, was arrested and charged last week with conspiracy to commit securities fraud. Punishment could entail up to five years behind bars and fines of up to $250,000.
Five other financial, consulting and technology executives were also fingered last week, concluding a two-year investigation into the alleged $20m scheme. The centrepiece of the authorities' case is Raj Rajaratnam, founder of investment firm The Galleon Group.
Moffat stands accused of passing on information about IBM's financial results, as well as those of Sun Microsystems. It is claimed he was privy to Sun's books while conducting due diligence on the firm as IBM considered a possible acquisition. Oracle eventually bought the server specialist in April.
Moffat is also alleged to have been caught on tape last August discussing chip vendor AMD's plans to spin off its manufacturing operations. The plan went ahead in October 2008, but prosecutors claim to have evidence of earlier discussions between Moffat and Danielle Chiesi, formerly of hedge fund specialist New Castle Funds.
IBM has confirmed Moffat has been put on a temporary leave of absence. He has been replaced on an interim basis by Rodney Adkins.
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