United States v. Newman, No. 13-1837 (2d Cir. 2014)Annotate this Case
Defendants appealed their convictions for securities fraud in violation of sections 10(b) and 32 of the Securities Exchange Act of 1934, 15 U.S.C. 78j(b), 78ff; Securities and Exchange Commission (SEC) Rules 10b-5 and 10b5-2, 17 C.F.R. 240.10b-5, 240.10b5-2, and 18 U.S.C. 2; and conspiracy to commit securities fraud in violation of 18 U.S.C. 371. The court concluded that, in order to sustain a conviction for insider trading, the Government must prove beyond a reasonable doubt that the tippee knew that an insider disclosed confidential information and that he did so in exchange for a personal benefit; the court held that the evidence was insufficient to sustain a guilty verdict against defendants because the Government's evidence of any personal benefit received by the alleged insiders was insufficient to establish the tipper liability from which defendants' purported tippee liability would derive, and even assuming that the scant evidence offered was sufficient, the Government presented no evidence that defendant knew that they were trading on information obtained from insiders in violation of those insiders' fiduciary duties; and, therefore, the court reversed and remanded with instructions to dismiss the indictment.