Major Reversal of Insider Trading Convictions after Trial: Second Circuit Sets High Bar for Tippee Liability

December 2014

The United States Court of Appeals today reversed the convictions for insider trading of Todd Newman and Anthony Chiasson. The Court held that the government was required to prove, but did not, that the defendants knew that the insider who disclosed the confidential information did so in exchange for a personal benefit. The district court did not instruct the jury that this was an element of insider trading, and the government introduced insufficient evidence on this point (as well as on the issue of whether the insider received a personal benefit). As a result, the convictions are reversed and the indictments are dismissed. This is a major reversal for the U.S. Attorney’s Office for the Southern District of New York, and it clarifies a rule of law that will make prosecution of remote tippees more difficult than it had been before.

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