‘Relationship Of Trust’ May Be Required For Insider Trading Under Canon Law, Is Not Under U.S. Law

Vitaly Korchevsky knows, in his heart, that he is “clean before the Lord.” Unfortunately for the Morgan Stanley vice president turned hedge fund manager and pastor, while trading on stolen press releases may not violate any Biblical commandments, a jury found that it did violate U.S. securities law, which is why he’s currently preaching at the former Chez Madoff rather than the Slavic Evangelical Baptist Church in Brookhaven, Pa. And the higher authorities—namely, a three-judge panel of the Second Circuit Court of Appeals—is no more merciful.

Korchevsky and Khalupsky had made various arguments on appeal, including that prosecutors failed to show that the information was obtained through a breach of duty to the companies or that investors were defrauded….

The court wrote that the pair were charged as "corporate outsiders," meaning prosecutors did not have to show the trades breached a relationship of trust, as they would in an insider trading case.

The panel also held that the law covers fraud connected to securities transactions, including when hackers "misrepresented themselves to be authorized users" to obtain the press releases.

2nd Circuit upholds convictions for hacked press release traders [Reuters]

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