Second Circuit Insider Trading Decision May Have Broad Impacts On White-Collar Prosecutions

Last week, the Second Circuit issued a potentially significant decision in an insider-trading case on remand from the Supreme Court. While the Court's decision was not necessarily unexpected in light of a prior concession by the Solicitor General, the court's analysis may significantly impact both insider trading investigations and broader "fraud" prosecutions going forward.

Background

The case, United States v. Blaszczak, involved allegations that one of the defendants (the "tipper") who worked for the U.S. government's Center for Medicare and Medicaid Services ("CMS"), gave other defendants (the "tippees") confidential information about the timing and substance of proposed changes to reimbursement rates for certain types of medical care for various health conditions ("CMS Data"). As alleged by the government, the tippees then used the CMS Data to execute profitable trades in companies that would be impacted by the changed reimbursement rates.