Mike Segar/Reuters and Brendan McDermid/ReutersAnthony Chiasson, left, of Level Global Investors, and Todd Newman, a former trader at Diamondback Capital Management.Two former hedge fund managers may remain free on bail while they challenge their insider trading convictions, a federal appeals court ruled on Tuesday.
The United States Court of Appeals for the Second Circuit in Manhattan ruled that Anthony Chiasson, the co-founder of Level Global Investors, and Todd Newman, a former portfolio manager at Diamondback Capital Management, will not have to report to prison while they fight their convictions.
A jury found Mr. Chiasson and Mr. Newman guilty last December of illegally trading the technology stocks Dell and Nvidia. A judge sentenced Mr. Chiasson to six and a half years in prison and Mr. Newman to four and a half years.
The ruling on Tuesday suggested that lawyers for Mr. Chiasson and Mr. Newman had convinced the judges that there was a “substantial question” of law to be argued on appeal. Indeed, during the argument, Judge Barrington D. Parker Jr., said to a federal prosecutor arguing the government’s case that it sounded “like we are going to have a lively appeal here.”
Lawyers for Mr. Chiasson and Mr. Newman are expected to make several arguments on appeal. Their primary argument relates to the proof required to convict a “tippee” of insider trading. Both Mr. Chiasson and Mr. Newman received confidential information about Dell and Nvidia through several intermediaries, and not directly from inside tippers at the two companies.
Their lawyers maintain that to be convicted of insider trading, Mr. Chiasson and Mr. Newman were required to know that the insiders — an employee at Dell and an employee at Nvidia — leaked the confidential information in exchange for a personal benefit. And because both were so far removed from the information, neither had any knowledge of whether the tippers provided the secret data to benefit themselves, they argued.
Lawyers for Mr. Chiasson and Mr. Newman argue that the trial court judge, Richard J. Sullivan, instructed the jury incorrectly on this issue, creating a legitimate issue to be argued before the appeals court.
The court is expected to hear oral arguments on the appeal in either December or January, and then is likely to take several months to rule on the case.
Representing Mr. Chiasson in his appeal is Mark Pomerantz of Paul, Weiss, Rifkind, Wharton & Garrison. Mr. Newman’s lawyers are Stephen Fishbein and John Nathanson of Shearman & Sterling.