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A Fresh Take

Insights on M&A, litigation, and corporate governance in the US.

| 1 minute read

The Supreme Court Vacates Second Circuit Insider Trading Decision After “Bridgegate” Ruling

On January 11, 2021, the U.S. Supreme Court vacated the US Court of Appeals for the Second Circuit’s ruling in the insider trading case United States v. Blaszczak—discussed in our prior briefing. In that case, the Second Circuit held i) that the government need not demonstrate that the tipper received a “personal benefit” to prove fraud in an insider trading case under Title 18 of the US Code, and ii) that confidential information may constitute “property” when held by a government agency such that misappropriation of that information can be prosecuted as fraud (in Blaszczak, the relevant information was an upcoming ruling by the Centers for Medicare & Medicaid Services regarding the reimbursement rates for certain radiation oncology treatments). We predicted that this decision could lead to more aggressive insider trading enforcement, including in cases involving confidential government information.

The Supreme Court has now ordered the Second Circuit to reconsider its Blaszczak decision in light of the Supreme Court’s ruling in the “Bridgegate” case, United States v. Kelly. There, the Supreme Court found that two politicians’ scheme to limit access to a bridge connecting New York City to New Jersey did not qualify as wire fraud because its goal was not to obtain money or property. Specifically, the Supreme Court determined that the government’s interest in exercising its regulatory power—in Kelly, its authority to allocate lanes for drivers accessing the George Washington Bridge—did not constitute “property” for purposes of the federal criminal fraud statutes at 18 U.S.C. §§ 666, 1343 (theft or bribery concerning federally funded programs; wire fraud). Thus, the issue for reconsideration in Blaszczak will be whether confidential government information (the oncology treatment reimbursement rates) constitutes “property” under 18 U.S.C. §§ 1343, 1348 (wire fraud and securities fraud).

Although the Kelly decision does not affect the Second Circuit’s “personal benefit” analysis, the Second Circuit may not have the opportunity to reach that question again if it overrules its earlier decision after revisiting the definition of government “property.” If the Second Circuit changes its position on the “property” question in light of Kelly, it will remain an open question if, in order to obtain an insider-trading conviction under Title 18, the government must demonstrate a personal benefit to the tipper.


investigations, white-collar defense, litigation