Once again, a federal appeals court in New York will tomorrow hear from convicted hedge fund insider-traders seeking to have their guilty verdicts overturned.
Anthony Chiasson and Todd Newman plan to argue that as “downstream tippees,” they were unaware that the sources of their information were being compensated for it. Their lawyers say that such a demonstration is required to sustain an insider-trading conviction.
Chiasson, the co-founder of Level Global Investors, and Newman, a former portfolio manager at Diamondback Capital Management, were convicted of fraud in 2012. The former was sentenced to six-and-a-half years and the latter four-and-a-half years in prison, although both remain free pending the appeal.
Prosecutors say that the two were part of a “corrupt circle” that traded in insider information. Both received tips from their analysts, who cooperated with prosecutors.
To date, none of the people convicted in the recent government crackdown on insider-trading have succeeded on appeal. But Chiasson’s and Newman’s lawyers argue that the judge in their trial came to the opposite conclusion reached by four other federal judges in such cases.