Supreme Court lets insider trading reversal stand

October 06 00:26 2015

In a decision that is expected to undo some of the government’s massive insider-trading crackdown, the United States Supreme Court Monday denied review of U.S. vs. Newman, a major insider trading case that has been closely watched by Wall Street, prosecutors and the FBI. The decision overturns the convictions of Anthony Chiasson and Todd Newman who were found guilty in 2012 of using inside information to make millions for their hedge funds. In December, the U.S. Court of Appeals for the Second Circuit reversed those convictions in a ruling that addressed long-held questions about how close someone needs to be to the source of an illegal tip to be culpable.635594119943931322-AP-FINANCIAL-MARKETS-WALL-STREET-70748234 (1)

Specifically, the 2nd Circuit appeals court ruled that in order to be convicted of insider trading a person must have direct knowledge of the insider doling out the tips. The court said the government must prove that the person being accused of illegal trading was aware that the tipper breached his fiduciary duty and received some sort of benefit, like cash or a job, in exchange for the information provided.

Newman and Chiasson traded on tips they received from their staff analysts, who were found guilty of scouring stock tips from a network of analysts and corporate insiders and then passing them on to their bosses. As a result, their bosses were shielded from direct communication with the tippers, who provided inside information on chip-makers Dell and Nvidia.

The Supreme Court’s decision not to review the case at the request of the government let’s the lower court’s decision overturning the conviction stand. “Mr. Chiasson is deeply gratified by this complete vindication, one that ends the five year ordeal he and his family endured,” said his lawyer Greg Morvillo said in a statement. “The Second Circuit Court of Appeals’ pronouncement of Mr. Chiasson’s innocence, as well as that court’s harsh chiding of the government’s tactics, has withstood all challenges and is now final.”