Insider Traders Seek Conviction Reversal on Jury Order

Two former hedge fund managers convicted of insider trading in the seven-year U.S. crackdown on Wall Street market manipulation asked the U.S. Court of Appeals in New York to overturn the verdict, arguing improper jury instructions from the trial judge resulted in a wrongful conviction.

Level Global Investors LP co-founder Anthony Chiasson and ex-Diamondback Capital Management LLC portfolio manager Todd Newman claim jurors at their trial were told they had to find that the defendants knew tips they traded on weren’t public and breached a fiduciary duty, and weren’t told of an additional element other judges had required.

Lawyers for the two men said at least three trial judges have required that the traders also know the original source of the inside information received a benefit for the tip.

Prosecutors have argued that all they need to prove is that traders were aware information they used wasn’t public and breached a fiduciary duty, as they did in winning the conviction of SAC Capital Advisors LP fund manager Michael Steinberg. U.S. District Judge Richard Sullivan took the same position in that case as in the trial of Chiasson and Newman.

A ruling by the federal appeals court in favor of Chiasson and Newman may imperil the Steinberg conviction, which along with the conviction of former SAC Capital fund manager Mathew Martoma was among the biggest victories for Manhattan U.S. Attorney Preet Bharara in his prosecutions of Wall Street wrongdoing, and at SAC Capital in particular.

At trial, the prosecutors said Chiasson and Newman were part of a group of portfolio managers, fund analysts and company insiders who shared material nonpublic information about Dell Inc. and Nvidia Corp. and traded on them as part of a sprawling $72 million insider-trading scheme.

The appeals case is U.S. v. Newman and Chiasson, 13-1917, U.S. Court of Appeals for the Second Circuit (Manhattan). The lower court case is U.S. v. Newman, 1:12-cr-00121, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Patricia Hurtado in Federal Court in Manhattan at

To contact the editors responsible for this story: David E. Rovella at Joe Schneider

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