Insider-Trading Appeal Would Really Shake Things Up In The Vanishingly Small Likelihood It Succeeds

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]

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7 Responses to “Insider-Trading Appeal Would Really Shake Things Up In The Vanishingly Small Likelihood It Succeeds”

  1. Preet says:

    Rengan Rajratnam lost a big motion to dismiss on Friday too. Trial date now June.

    Expect a post. ( then some bars )

  2. Quant me maybe ... says:

    This article is particularly hard to read if one has a hangover.

    >Guy who survived Easter with a bottle or two or possibly three of wine.

  3. Bessy Ventura says:

    Love the extra comment protection guys! Thank you for your service!

  4. What exactly constitutes "insider trading"? The lines have never been clear and instead of the SEC stepping in to do their job and better define the rules the DOJ has been exploiting this murkiness and the public's resentment of Wall Street to rack up convictions. Preet Bharara gets his Time Magazine cover and Frontline puff piece about cleaning up Wall Steet. Meanwhile, they hope the public forgets the fact that not one person went to prison for the rampant mortgage fraud that fueled the Great Recession and cost millions their homes and jobs. But rest assured, there is a new sheriff on Wall Street making the markets fair. Give me a break!

    • Guest says:

      Insider trading is like pornography. U know it when u see it.

      For example, your analyst is jumping up and down screaming that Dell is gonna miss this quarter. You wonder how he knows that but don't ask, worried that that would constitute insider trading. And u short Dell. Bam: insider trading. Again: like pornography….

  5. FatGuySkinnyTie says:

    Last time I bugged out this hard waiting for a period to arrive, she was 17 and Latino.

    Now he's 22 and Jewish.

    Movin' on up