In 2014, the U.S. Court of Appeals for the Second Circuit threw a wrench into the government’s insider trading prosecutions by ruling that a tippee cannot be found guilty under §10(b) of the Securities Exchange Act unless the tippee knew that the insider had divulged the information for a personal benefit. United States v. Newman, 773 F.3d 438, 449 (2d Cir. 2014). Such knowledge can be particularly difficult to prove for “remote tippees”—i.e., tippees one or more steps removed from the tipping corporate insider.

One question that Newman left unanswered was whether its holding applies to tippee prosecutions under the Title 18 statutes, such as wire fraud (18 U.S.C. §1343) and securities fraud (18 U.S.C. §1348). In December 2019, the Second Circuit finally answered that question. The court reasoned in United States v. Blaszczak that §10(b) and the Title 18 fraud statutes have distinct statutory purposes, and that Newman’s “personal-benefit test is a judge-made doctrine premised on the Exchange Act’s statutory purpose.” Accordingly, the court declined to apply Newman to §1343 and §1348. United States v. Blaszczak, 947 F.3d 19, 34-37 (2d Cir. 2019). (The Blaszczak defendant-appellants are currently petitioning the Second Circuit for rehearing or rehearing en banc.)

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