U.S. v. Blaszczak – “Personal Benefit” Test Does Not Apply to Title 18 Insider Trading Cases: The Second Circuit Lowers the Standard for Proving Title 18 Insider Trading, Making It Easier for the Government to Bring Insider Trading Cases Where There Is No “Personal Benefit” to the Insider Who Discloses Information

Sullivan & Cromwell LLP - January 6, 2020
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On December 30, 2019 the Second Circuit upheld the insider trading convictions of David Blaszczak and three others and held that in a prosecution brought pursuant to 18 U.S.C. § 1343 and § 1348, which criminalize wire and securities fraud, respectively, the government need not prove that the defendants received a “personal benefit” in exchange for the provision of material nonpublic information as is required under 15 U.S.C. § 78j(b), which prohibits insider trading. The Court’s holding could prompt the government to make greater use of § 1343 and § 1348 in prosecuting insider trading cases. The majority of the Court also held that pre-decisional regulatory information regarding upcoming rule changes could constitute “property” for purposes of 18 U.S.C. § 1343 and § 1348.  One judge dissented, however, arguing that the government’s interest in rule-making information is purely regulatory.