2nd Circuit reverses 2 insider-trading convictions, narrowing scope of future prosecutions
In a blow to the U.S. Department of Justice, a federal appeals court on Wednesday reversed the insider-trading convictions of two former hedge fund portfolio managers.
Finding that the government failed to prove defendants Anthony Chiasson and Todd Newman had prerequisite knowledge of wrongdoing, the New York-based 2nd U.S. Circuit Court of Appeals dismissed their cases with prejudice, likely preventing any retrial.
“We agree that the jury instruction was erroneous because we conclude that, in order to sustain a conviction for insider trading, the government must prove beyond a reasonable doubt that the tippee knew that an insider disclosed confidential information and that he did so in exchange for a personal benefit,” the court held in its written opinion. A New York Times page also provides links to the briefing.
The decision could lead to the reversals of other high-profile convictions and was acknowledged by U.S. Attorney Preet Bharara of Manhattan to limit the scope of future prosecutions, according to the New York Times’ (reg. req.) Dealbook blog and the Wall Street Journal (sub. req.).
“Today’s decision by the Court of Appeals interprets the securities laws in a way that will limit the ability to prosecute people who trade on leaked inside information,” Bharara said in a written statement. He said his office is still reviewing the decision and hasn’t yet decided whether to pursue a further appeal.
Chiasson and Newman had been free on bond while their 2012 convictions were being appealed.
