The insider trading trial and conviction of Raj Rajaratnam, founder of the Galleon Group hedge funds, in the Southern District of New York, has continued to spark debate on issues ranging from the government’s aggressive use of blue-collar investigative tools in white-collar cases1 to the breadth of federal insider trading law. In affirming Rajaratnam’s conviction, the U.S. Court of Appeals for the Second Circuit relied on circuit precedent, originally articulated in United States v. Teicher,2 broadly interpreting insider criminal trading liability to include instances where a defendant has knowledge of insider information without evidence that he relied on the information in making a trade.

Rajaratnam, who currently is serving a sentence of 132 months imprisonment, is seeking review of the Second Circuit’s unique position on this issue by the U.S. Supreme Court. The application for certiorari coincides with the Second Circuit’s reconsideration of another significant insider trading issue, characterized by the Second Circuit as an open question, in the appeal of United States v. Newman3—whether a remote tippee in possession of inside information can be criminally liable if he does not know that the information was misappropriated.4 During oral argument, the Second Circuit panel expressed skepticism at the government’s prosecution of such defendants.5

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