The 2nd U.S. Circuit Court of Appeals in New York said prosecutors obtainable in short supply evidence to convict Todd Newman, a former assortment manager at Diamondback Capital Management, and Anthony Chiasson, co-founder of Level Global Investors.
“Although the government might like the law to be different, nothing in the law requires symmetry of in sequence in the nation’s securities markets,” U.S. Circuit Judge Barrington Parker wrote for the three-judge panel.
Newman and Chiasson had been sentenced to 4-1/2 years and 6-1/2 years in prison, in that order, and had been out on bail awaiting petition.
The ruling could also advantage Michael Steinberg, a SAC Capital portfolio manager convicted in December 2013 and later sentenced to 3-1/2 years in prison.”The 2nd Circuit’s decision clearly means that Michael Steinberg is innocent of any crime and his conviction will be vacated as well,” said Barry Berke, Steinberg’s lawyer.
Prosecutors said both men traded on tips they received from analysts working at their hedge funds who were members of a “corrupt circle” of speculation firm analysts that traded non-public information obtained from employees at a variety of companies.
“What basis could you perhaps have for determining which information you can use and which you can’t?” she said.
The ruling could also add force for the U.S. Securities and Exchange Commission to explain in greater specify which behaviors on Wall Street count as insider trading, said C. Evan Stewart, a partner at Cohen & Gresser in New York.
U.S. officials have argued the rules are clear, but traders, including Steven A. Cohen, founder of the firm called SAC assets until its recent rebranding, contend they are not.
“This is the 2nd Circuit saying there needs to be greater clarity about what the law is here,” Stewart said.