Supreme Court Directs Second Circuit to Take a Fresh Look at Insider Trading Prosecution

In 2018, David B. Blaszczak, government employee Christopher M. Worrall and three analysts at Deerfield Management Company, L.P. were convicted of insider trading, wire fraud and other charges under Title 18 of the U.S. Code. In late 2019, the U.S. Court of Appeals for the Second Circuit held in U.S. v. Blaszczak that government information may constitute “property” for purposes of Title 18 fraud statutes and that the “personal benefit” test for insider trading liability did not apply to Title 18 securities fraud. Three of the defendants appealed to the U.S. Supreme Court, which declined to reach the merits of the appeal. Instead, at the government’s request, it vacated the Second Circuit decision and remanded the case to that court for reconsideration in light of the Supreme Court’s May 2020 decision in Kelly v. United States, which addressed what constitutes government property under the Title 18 fraud and conversion statutes. This article analyzes the facts giving rise to the prosecutions, the Second Circuit’s reasoning, the defendants’ principal arguments on appeal and the Kelly decision. See “SEC Insider Trading Action Highlights Red Flags Hedge Fund Managers Must Heed When Employing Political Intelligence Consultants” (Jun. 8, 2017).

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