Reuters, Washington :
U.S. prosecutors, already smarting from a appeals court ruling that weakens their ability to crack down on future insider trading, on Thursday faced widening fallout from the decision as some existing cases threatened to unravel.
Lawyers for some defendants hinted they might seek to withdraw guilty pleas, and a Manhattan federal judge questioned if four such pleas were affected.
The moves were the latest repercussions from the 2nd U.S. Circuit Court of Appeals finding that prosecutors presented insufficient evidence to convict Todd Newman, a former portfolio manager at Diamondback Capital Management, and Anthony Chiasson, co-founder of Level Global Investors.
Speaking at a conference, U.S. Securities and Exchange Commission Chair Mary Jo White said Thursday “there is no question it’s a significant decision,” adding her agency was reviewing the Wednesday ruling, which she called “overly narrow.”
Some defendants who cooperated and pleaded guilty in the prosecution of Newman and Chiasson are now considering taking the extraordinary step of withdrawing their pleas, two lawyers said Thursday.
The three-judge panel not only found that prosecutors needed to prove a trader knew that the original source of non-public information has received a benefit in exchange for the tip, but also narrowed what actually constituted such a benefit.
In several such cases, the defendants were tipped based on information they received third- or fourth-hand, rather than straight from the source, which made it tougher to prove their awareness that source had obtained something tangible in return.
The ruling threatens to challenge a broad insider trading crackdown underway since 2009 under Manhattan U.S. Attorney Preet Bharara, whose office during his tenure has secured 82 other convictions.
U.S. prosecutors, already smarting from a appeals court ruling that weakens their ability to crack down on future insider trading, on Thursday faced widening fallout from the decision as some existing cases threatened to unravel.
Lawyers for some defendants hinted they might seek to withdraw guilty pleas, and a Manhattan federal judge questioned if four such pleas were affected.
The moves were the latest repercussions from the 2nd U.S. Circuit Court of Appeals finding that prosecutors presented insufficient evidence to convict Todd Newman, a former portfolio manager at Diamondback Capital Management, and Anthony Chiasson, co-founder of Level Global Investors.
Speaking at a conference, U.S. Securities and Exchange Commission Chair Mary Jo White said Thursday “there is no question it’s a significant decision,” adding her agency was reviewing the Wednesday ruling, which she called “overly narrow.”
Some defendants who cooperated and pleaded guilty in the prosecution of Newman and Chiasson are now considering taking the extraordinary step of withdrawing their pleas, two lawyers said Thursday.
The three-judge panel not only found that prosecutors needed to prove a trader knew that the original source of non-public information has received a benefit in exchange for the tip, but also narrowed what actually constituted such a benefit.
In several such cases, the defendants were tipped based on information they received third- or fourth-hand, rather than straight from the source, which made it tougher to prove their awareness that source had obtained something tangible in return.
The ruling threatens to challenge a broad insider trading crackdown underway since 2009 under Manhattan U.S. Attorney Preet Bharara, whose office during his tenure has secured 82 other convictions.
