The defense community who deals with white collar crime has closely watched as the U.S. appears court overturned two former hedge managers’ convictions who were allegedly guilty of technology stock insider trading.
New York’s 2nd U.S. Circuit Court of Appeals ruled the prosecutors in the case against Todd Newman, a former Diamondback Capital Management portfolio manager, and Anthony Chiasson, Level Global Investors co-founder, presented insufficient evidence for a conviction.
This ruling was a blow against Manhattan U.S. Attorney Preet Bharara and federal prosecutors’s insider trading crackdown. The appeals court held that the defendants can be convicted for insider trading only if the person doing the trading using that information was aware the original tip-giver had disclosed the insider information in exchange for their personal benefit.
Newman and Chiasson were found guilty in 2012 for insider trading based on information about Dell, Inc., computers and the Nvidia Corp chipmaker. The government alleged the scheme reaped illicit profits in the amount of $72 million. Prosecutors claimed the information allegedly used by Newman and Chiasson was gotten from analysts who allegedly were members of a “corrupt circle” who traded information not known by the public and which they obtained while employees at various companies.
Newman was originally sentenced to 4-1/2 years in prison while Chiasson was sentenced to 6-1/2 years. Both are out on bail pending an appeal.
This case was closely watched to see if the appeals court would set a new precedent for providing proof in other insider trading cases.
University of Pennsylvania School of Law professor Jill Fisch felt their ruling indicated prosecutions for recent insider trading had gone too far. Although traders should not be permitted to buy non-public information from corporate insiders, she stated that traders on Wall Street routinely “get a whole lot of information from people that you talk to all the time.”
C. Evan Stewart, who is a partner at Cohen & Gresser, feels the court’s ruling could pressure the U.S. Securities and Exchange Commission to explain and define exactly what Wall Street behaviors count as far as insider trading is concerned. Although the SEC doesn’t dictate the criminal laws relating to insider trading, they do provide standards for what criminal fraud laws are applied to such cases.
If you have been arrested for an alleged federal crime such as insider trading, you need the expert experience of a criminal defense attorney such as Sevens Legal, APC. Contact Sevens Legal, APC, today for a free consultation.