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  • Supreme Court Vacates And Remands Blaszczak Insider Trading Decision, Providing Opportunity For Further Clarity By Second Circuit


    On January 11, 2021, the Supreme Court vacated the Second Circuit’s decision in United States v. Blaszczak, 947 F.3d 19 (2d Cir. 2019), remanding the case to the Second Circuit for consideration in light of the Court’s decision in Kelly v. United States, 140 S. Ct. 1565 (2020).  In Kelly, the Supreme Court overturned the convictions of two New Jersey public officials in the Bridgegate scandal, holding that while the conduct at issue may have constituted an abuse of power, it did not amount to a violation of either the federal wire fraud statute or a violation of the federal program fraud statute because the object of the scheme was the implementation of a regulatory object, rather than to obtain money or property.  This may lead the Second Circuit to reverse or at least modify its December 2019 decision affirming convictions in Blaszczak, a decision that caused concern over its potentially significant expansion of insider trading liability.
  • Energy Company Agrees To Pay Over $150 Million To DOJ, CFTC, And Foreign Regulator To Resolve Coordinated FCPA Allegations

    On December 3, 2020, the U.S. Department of Justice (“DOJ”) announced that a Texas-based subsidiary of the Swiss energy trading company (“the Company”) had entered into a deferred prosecution agreement (“DPA”) pursuant to which it agreed to pay $135 million to resolve allegations that it conspired to violate the Foreign Corrupt Practices Act (“FCPA”) and to end a parallel investigation in Brazil.  The Company also agreed to pay more than $28 million to the Commodity Futures Trading Commission (“CFTC”) for related matters, in the first coordinated resolution between the DOJ and the CFTC in an FCPA matter. 
  • Supreme Court Overturns Third Circuit, Throws Out Bridgegate Convictions

    On May 7, 2020, the U.S. Supreme Court unanimously overturned a ruling from the United States Court of Appeals for the Third Circuit that upheld the convictions of two former New Jersey officials who were part of the 2013 “Bridgegate” scandal to realign lanes to the George Washington Bridge (“GWB”).  Kelly v. United States, No. 18-1059, 588 U.S. __, 2020 WL 2200833 (2020).  Writing for a unanimous court, Justice Kagan wrote that while the conduct at issue may have constituted an abuse of power, it did not amount to a violation of either the federal wire fraud statute or a violation of the federal program fraud statute because the object of the scheme was the implementation of a regulatory object, rather than to obtain money or property.
  • Second Circuit Reverses $18.5 Million Restitution Order For Lack Of Proximate Cause

    On December 3, 2019, the Second Circuit affirmed the convictions of two defendants for wire fraud and conspiracy to commit wire and bank fraud, but reversed the District of Connecticut’s order that defendants pay $18.5 million in restitution to the U.S. Department of Agriculture (“USDA”).  United States v. Calderon, No. 17-1956, 2019 WL 6482379 (2d Cir. Dec. 3, 2019). 
  • Second Circuit Amends Martoma And Reaffirms, But Arguably Still Weakens, Newman’s “Meaningfully Close Personal Relationship” Test In Insider Trading Cases Involving Tips

    On June 25, 2018, a divided three-judge panel of the Second Circuit amended its decision in United States v. Martoma. We previously reported on the facts of Martoma and the panel’s original decision, which held that the Supreme Court abrogated the “meaningfully close personal relationship” test articulated in United States v. Newman. See Shearman & Sterling LLP: Government/Regulatory Enforcement, Divided Second Circuit Panel Abandons Relationship Test From Landmark Newman Decision in Upholding Insider Trading Conviction (Aug. 29, 2017). The panel’s amended opinion, in contrast, holds that Newman’s “meaningfully close personal relationship” test is still valid for determining whether an insider tipper received a personal benefit (and thus breached a fiduciary duty), but also holds that the test will be satisfied upon a showing that (1) the “tipper and tippee shared a relationship suggesting a quid pro quo” or (2) “the tipper gifted confidential information with the intention to benefit the tippee.” United States v. Martoma, No. 14-3599, Dkt. No. 226 (2d Cir. June 25, 2018), at 5-6.

  • Seventh Circuit Upholds First Spoofing Conviction Against High-Frequency Trader

    On August 7, 2017, the Seventh Circuit upheld the conviction of Michael Coscia, founder of Panther Energy Trading LLC, for a market manipulation tactic known as “spoofing,” under Section 6c(a)(5)(C) and 13(a)(2) of the Commodity Exchange Act.  United States v. Coscia, No. 16-cr-3017 (7th Cir. Aug. 7, 2017).  Coscia’s conviction is the first of its kind under this statute, which was created by the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010 and prohibits “bidding or offering with the intent to cancel the bid or offer before execution.”  The Seventh Circuit rejected Coscia’s claim that the statute was unconstitutionally vague and found that Coscia’s conviction was supported by sufficient evidence. 

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  • DOJ And SEC File Parallel Criminal And Civil Insider Trading Charges Against Scientist Who Conducted Internet Searches On How To Avoid SEC Detection

    On July 12, 2017, both the Department of Justice (“DOJ”) and Securities and Exchange Commission (”SEC”) filed insider trading charges against a research scientist who allegedly traded upon confidential information obtained from his wife.  See Press Release, Manhattan U.S. Attorney And FBI Assistant Director Announce Insider Trading Charges Against Spouse Of Lawyer At International Law Firm, Rel. No. 17-213 (July 12, 2017),; Press Release, SEC Files Inside Trading Charges Against Research Scientist Aiming to Avoid SEC Detection, Rel. No. 2017-125 (July 12, 2017),  The DOJ’s criminal complaint includes two securities fraud charges and one wire fraud charge, see United States v. Yan, 17-mag-5156 (July 12, 2017), while the SEC’s complaint charges violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Section 14(e) of the Exchange Act and Rule 14e-3 thereunder.  SEC v. Yan et al., 17-cv-05257 (S.D.N.Y. July 12, 2017).