As you’ve no doubt noticed, a number of hedge fund managers have in recent years been found guilty by a jury of their peers of insider-trading, a nebulous and gray-area-filled offense that some people think perhaps should not be illegal but which, all the same, is, and which conviction of said crime carries with it the potential for quite a few years in a place where pampered financiers don’t always get the best of it. Given the latter, everyone who has been found so guilty by said jury of said peers has asked judges with higher pay grades to find that, in spite of their deep and abiding faith in American jurisprudence, 12 ordinary men and women committed a grave miscarriage of justice against them.
To date, none have succeeded, or really even come close to succeeding. So it is likely to be for Anthony Chiasson and Todd Newman, late of the late Level Global Investors and the late Diamondback Capital Management, respectively, who got rolled by their former analysts for the sharing of and trading in all manner of secret sauce about Dell Inc. and other technology companies. But man oh man, what if they did succeed where all others have failed? Let’s just say you could cancel that twice-life-size bronze monument to Preet Bharara planned for Foley Square.
The outcome of the appeal, which centers on two former hedge-fund managers, could threaten some of the convictions won by prosecutors in their yearslong crackdown on insider trading….
The appeal is being pursued by Todd Newman and Anthony Chiasson, two portfolio managers whose 2012 insider-trading convictions were a significant victory for prosecutors. The two men, free on bail pending the appeal, are seeking to have their convictions overturned. Their case is scheduled to be heard Tuesday in the U.S. Court of Appeals for the Second Circuit in Manhattan….
Messrs. Newman and Chiasson were so-called downstream tippees—meaning they didn’t receive information on technology companies Dell Inc. and Nvidia Corp. directly from its source, but were one or more layers removed….
Lawyers for Messrs. Newman and Chiasson say prosecutors must show that their clients knew the tippers were somehow compensated for the tips and that the judge’s instruction was erroneous. The inside tips on which the pair traded were conveyed through a network of analysts before reaching analysts who worked for Messrs. Chiasson and Newman, the lawyers said in court documents. Their clients didn’t seek out or knowingly use inside information, they said.
Prosecutors have said they need only show that people who used the tips were aware the tipper disclosed the nonpublic information in breach of a fiduciary duty when they traded on it….
f the court rules in favor of Messrs. Chiasson and Newman, defense lawyers will have new ammunition to overturn several high-profile convictions, including that of Michael Steinberg, a former SAC Capital LP portfolio manager, in December.
Court Case May Help Define ‘Insider Trading’ [WSJ]