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Prosecutors' Long Winning Streak on Insider Trading Could Soon Be Over

Preet Bharara
Preet BhararaPhotograph by Victor J. Blue/Bloomberg

For months now, the U.S. Attorney for the Southern District of New York, Preet Bharara, has been boasting of his office’s perfect record on insider trading convictions and guilty pleas, which now stands at 80-0. But on Tuesday some potential cracks could appear in that pristine run.

The U.S. Court of Appeals for the Second Circuit will hear arguments in a case that is being closely watched—and fretted over—by investigators involved in the government’s historic string of insider trading prosecutions. Two convicted hedge fund portfolio managers are arguing that what the government accused them of doing isn’t actually illegal, and the appeals court appears to be taking their arguments seriously. If the Second Circuit rules against the government, in the words of one attorney close to the case, it would be “nothing less than an earthquake.”