Matt Levine, Columnist

Appeals Court Not So Keen on Insider Trading Crackdown

Now you can pass inside information to your friends and it's OK, as long as they don't pay you for it. I mean, obviously don't do that. But you maybe could?

December 10, 2014 at 6:36 PM UTC

By Matt Levine

Matt Levine is a Bloomberg Opinion columnist. A former investment banker at Goldman Sachs, he was a mergers and acquisitions lawyer at Wachtell, Lipton, Rosen & Katz; a clerk for the U.S. Court of Appeals for the 3rd Circuit; and an editor of Dealbreaker.

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Todd Newman and Anthony Chiasson are two hedge fund managers convicted in U.S. Attorney Preet Bharara's big push to prosecute insider traders. They appealed their convictions to the U.S. Court of Appeals for the Second Circuit, and a lot of people expected the Second Circuit to reverse. There were some technical problems with the district judge's jury instructions. Plus, as I said, Newman and Chiasson didn't actually seem to be guilty. So those two things combined would probably be enough to get the convictions reversed. The way it works is, if the appeals court thinks you're innocent, then it finds a problem with the jury instructions and reverses the conviction. The appeals court doesn't just declare you innocent. That's too drastic.

Today the appeals court declared Newman and Chiasson innocent.1 You can read the opinion here, and it is just astounding. The jury instructions, sure, the jury instructions were wrong, whatever. The appeals court is not interested in jury instructions. It thinks that Bharara's entire insider trading crackdown is fundamentally misguided. I mean, this passage: