A federal appeals court has overturned a pair of insider trading convictions, dealing a major blow to Manhattan U.S. Attorney General Preet Bharara and his office. Bharara has earned a reputation for tracking down insider trading and locking in convictions.

Insider trading convictions overturned

The New York Times reports that the decision could have major implications for the future of laws about insider trading. Court documents indicate the court has tossed out cases against former hedge fund traders Anthony Chiasson and Todd Newman.

The 28-page document cites the “erroneous” instructions the judge in the case reportedly gave to jurors. It also not only overturns the convictions but entirely dismisses both cases. According to the three-judge panel, there was also insufficient evidence to support the two convictions. An attorney for Chiasson emailed the following statement regarding the court’s decision to ValueWalk.

“Today’s decision is a resounding victory for the rule of law and for Anthony Chiasson personally,” said attorney Gregory Morvillo. “Mr. Chiasson has always conducted himself according to the highest ethical and professional standards in service to many of the world’s leading hedge fund investors who were his clients for years. He is deeply gratified that the decision issued today unequivocally re-establishes his innocence under the law – consistent with what Anthony has steadfastly maintained for the duration of this ordeal.”

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SAC Capital – Bharara’s insider trading convictions unraveled

This is the first blemish on Bharara’s track record in tracking down and prosecuting traders accused of insider trading. It could have broad-reaching implications for some of his other cases. Additionally, the decision offers guidance for attorneys defending others accused of insider trading in the future.

Former SAC Capital portfolio manager Michael Steinberg is one who could benefit from today’s decision. Bharara indicted SAC Capital Advisors on insider trading charges last year. Steinberg was also convicted of insider trading last year, and the judge who presided over Newman’s and Chiasson’s trial was the same—Judge Richard J. Sullivan.

SAC Capital implications- Why the convictions were overturned

The appeals court ruled that Judge Sullivan set the bar to prove insider trading too low when he gave instructions to the jury. The issue was whether the jurors needed to decide that Chiasson and Newman were aware that technology company insiders were leaking confidential information to hedge funds and receiving some “personal benefit” in exchange.

Judge Sullivan reportedly said the government didn’t have to prove the two former hedge fund traders knew about the personal benefits. However, defense lawyers successfully argued that these instructions went against a ruling from 30 years ago in the U.S. Supreme Court.

Chiasson and Newman were down the insider trading chain uncovered by prosecutors, putting them at the fourth or fifth position of a chain of people involved in receiving tips from technology companies. Neither of the two men reportedly received the tips directly, so today’s decision weighs heavily on the government’s decision to target traders who were not direct recipients of the tips.