Level Global Investors LP co-founder Anthony Chiasson and former Diamondback Capital Management LLC portfolio manager Todd Newman, sentenced to prison for insider trading, can remain free while they fight their convictions, an appeals court ruled.
Chiasson, of Manhattan, was sentenced last month to serve 6 1/2 years in prison, while Newman, of Needham, Massachusetts, was sentenced to 4 1/2 years after both were convicted by a federal jury in Manhattan for being part of a $72 million insider-trading scheme.
Lawyers for both men today told a federal appeals court in New York that their clients should remain free because there is a “substantial question” of law to be decided in the case. Both fund managers said U.S. District Judge Richard Sullivan, who presided over their case, issued a ruling during the trial that made it easier for the government to prove culpability for insider trading.
The defense lawyers argued that two other federal judges in Manhattan have ruled differently than Sullivan in securities fraud cases, concluding that the recipient of a tip isn’t liable for insider trading unless he knew the person who provided the illegal information did so for a personal benefit.
“The fact that well-informed judges can and have disagreed confirms that the issue is the very paradigm of ‘fairly debatable,’” Stephen Fishbein and John Nathanson, lawyers for Newman, said in a motion filed with the appeals court.
“If this court accepts Mr. Newman’s legal argument that knowledge of personal benefit is required, he is likely to win a reversal of his conviction,” they said.
Sullivan had denied requests by both men to remain free pending appeal. Sullivan ordered Newman to surrender to the U.S. Bureau of Prison by July 8 and Chiasson to begin serving his term by Aug. 13.
Prosecutors in the office of Manhattan U.S. Attorney Preet Bharara said Sullivan didn’t make an error and both portfolio managers should begin serving their terms.
The case is U.S. v. Newman, 1:12-cr-00121, U.S. District Court, Southern District of New York (Manhattan).
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