After the 2008 financial meltdown, federal securities regulators took heat for their failure to discover or halt Bernard Madoff's Ponzi scheme. One of the U.S. Securities and Exchange Commission's responses was to get tough on insider trading.

The SEC encouraged U.S. attorneys to prosecute insider trading cases, with a special emphasis on the Southern District of New York, which is home to Wall Street. But the crackdown also reached Connecticut, one of the country's hedge fund capitals. In 2012, then-U.S. Attorney David Fein announced his staff was investigating several insider trading cases in Connecticut. “You'll read more about those,” Fein told one reporter.

But as defense lawyers and federal prosecutors have found, there are any number of interpretations over just what constitutes insider trading. As one recently overturned conviction illustrates, prosecutors often have one idea regarding the culpability of hedge fund employees and people who share financial information with friends (known as “tippees”) and the courts have another.