A US appeals court on Friday turned down a federal prosecutors’ request for reconsideration of a crucial ruling that truncated their ability of pursuance of insider trading cases, while jeopardizing several convictions.
The 2nd US Circuit Court of Appeals, New York, rejected a petition filed by two prosecutors for granting a rehearing in the case involving hedge fund managers Anthony Chiasson and Todd Newman, who last December won the reversal of their convictions for insider trading.
The court didn’t provide any explanation for why a petition for rehearing was turned down by the original three-judge panel and the complete 2nd US Circuit Court of Appeals, potentially 16 judges.
It was not clear if the government would seek US Supreme Court review within 90 days. Manhattan US Attorney spokesperson Preet Bharara declined to comment.
Releasing a statement, John Nathanson and Stephen Fishbein, lawyers for Newman, said, “It is now time for the government to move on and allow an innocent man to continue with his life.”
Friday’s ruling comes as a latest setback for a crackdown on insider trading by Bharara’s office that has resulted in charges against 93 people since 2009.
The US Securities and Exchange Commission and Bharara’s office had said that the December ruling has imposed threat on their ability to pursue insider trading.
The three-judge panel held that the prosecutors should prove an insider trader knew the source of a tip has received a benefit in exchange for the information.
Moreover, the court narrowed what constitutes a benefit and said that it should be of “some consequence” and cannot be just friendship.
The ruling has reversed the convictions made in 2012 involving Chiasson, co-founder of Level Global Investors, and Newman, a former Diamondback Capital Management portfolio manager.
Chiasson and Newman had been sentenced to 6-1/2 years and 4-1/2 years imprisonment, respectively, for their engagement in a USD 72 million scheme under insider tips about Nvidia Corp. and Dell Inc.