The Supreme Court denied review today of U.S. v. Newman, the Second Circuit’s December 2014 decision throwing out insider trading charges against hedge fund managers Todd Newman and Anthony Chiasson. That decision also called into question a number of other insider trading prosecutions in the Southern District of New York.
In declining to grant certiorari, the Supreme Court let stand the Second Circuit’s holding that in order to convict a remote tippee of insider trading, the government must prove that the tipper received a fairly robust “personal benefit” in exchange for the tip and that the tippee knew it. According to the Second Circuit, the jury charge in Newman did not meet this standard. The Court of Appeals also found that the government failed to present any evidence that Newman and Chiasson knew of any benefit provided to the insiders.
We’ll continue to report on what happens now that the Second Circuit’s decision is final. Former SAC Capital portfolio manager Michael Steinberg, for example, is another remote tippee who was convicted pursuant to jury instructions that didn’t comport with Newman. Steinberg’s own appeal has been held in abeyance by the Second Circuit since April, pending word on the issue from the Supreme Court.