Anthony Chiasson

You’re only guilty of criminal insider trading, in America,1 if:

  • you trade on information that is material and nonpublic, and
  • some other stuff.

The other stuff is mostly stuff that only a lawyer could love, but man do they love it. It consists most importantly of the rule that the person who gives you the material nonpublic information needs to have done so in breach of some duty to keep the information secret and in order to get some personal benefit for himself. If a stranger just wanders up to you and says “I’m the CEO of Smerbafife and it’s a giant fraud, gotta go,” and you trade on that: you’re probably good.

This doesn’t help very often, though, since the personal benefit for the tipper doesn’t have to be an explicit bribe, or an explicit anything; just a desire to spice up your friendship with some material nonpublic information can qualify.2 (Also: usually there are bribes. You start with casual venting of frustrations and the next thing you know you’re accepting bags of cash in parking lots.)

It might help Anthony Chiasson and Todd Newman though: Read more »

Anthony Chiasson, the co-founder of the hedge fund Level Global Investors, was sentenced to 6.5 years in prison today for illegal trading in two tech stocks…Throughout the hearing, Chiasson sat surrounded by his lawyers, chewing gum furiously. “What I keep coming back to is this crime, these crimes, were committed over a long period of time, over a time when you were already fabulously wealthy,” said Judge Sullivan. “I don’t know if I’ve ever sentenced someone as wealthy as you.” He added: “It’s hard to understand why someone would risk something like that.” Chiasson’s lawyers, meanwhile, reviewed the many good deeds their client had done in life, his role as a family man with two small children and the fact that he was an altar boy when he was 8 years old. When it came time for Judge Sullivan to deliver the verdict, Chiasson, 39, stood up and shoved his hands deep into his pockets, his jaw chomping away the whole time. After informing Chiasson that he would be spending 78 months in prison, Sullivan said: “You conducted yourself with dignity—except for chewing gum.” [BusinessWeek]

It gives me no particular pleasure to update the ol’ insider trading sentencing chart every time a new person is convicted of insider trading, but I view it as a public service for the less instinctually law-abiding among our readers and here we are:

After three days of deliberations, a jury convicted Anthony Chiasson, a co-founder of Level Global Investors, and Todd Newman, a former portfolio manager at Diamondback Capital Management. The two had denied charges that they participated in a conspiracy that made more than $70 million illegally trading technology stocks.

Anyway chart (background here):

As, like, half of Manhattan gets convicted of insider trading, this chart has gotten a bit raggedy; various forms of cooperation or sympathy or silliness of the sentencing guidelines will move you off the predicted lines. Read more »

Later this week, Anthony Chiasson, a Level Global co-founder, and Todd Newman, a former Diamondback portfolio manager, will go to trial in Federal Court for allegedly making $67 million in ill-gotten gains, based on inside information they obtained about Nvidia Corp and Dell Inc. According to U.S. Attorney Preet Bharara, Chiasson and Newman, who’ve both pleaded not guilty, were able to rack up all their profits by teaming up with a bunch of friends and forming an insider trading club, which is a lot like a book club or fight club in that they took roll, traded canapé duties, and drank Pinot Grigio, but different in that instead of discussing The Art Of Fielding or punching each other in the face, they spent every Monday night from 7 to 9 sharing material non-public information with each other.

“This case describes a tight-knit circle of greed on the part of professionals willing to traffic in confidential information,” Bharara said when the charges were announced in January. “It was a circle of friends who essentially formed a criminal club, whose purpose was profit and whose members regularly bartered inside information.”

In the beginning, when the club was first formed, there was a spirit of camaraderie, as the members happily traded tips for everyone’s mutual benefit. Unfortunately, things started to break down when some people agreed to cooperate with the government by recording their friends admitting wrongdoing in exchange for leniency. Former Diamondback analyst Jesse Tortora, for instance, attempted to incriminate fellow club member Danny Kuo on a call the FBI directed him to make on December 1, 2010, a conversation that Chiasson and Newman’s lawyers are now trying to use as evidence that Tortora, who will be testifying against them lacks credibility, based on the fact that when asked by Kuo if his phone was being tapped, Tortora didn’t say “Yup! Helping the Feds build a case against you, actually.” Instead he went with this:

“What’s happening, man?” Tortora asked during the call, according to a transcript prosecutors submitted to the court.

“Dude, is your phone tapped?” Kuo replied.

“Wait, is the phone tapped?” Tortora asked, adding, “Why do you ask that?”

Read more »