Second Circuit Review: Constraints on Insider Trading Liability

Litigation of counsel Martin Flumenbaum and firm Chairman Brad Karp’s latest Second Circuit Review column, “Constraints on Insider Trading Liability,” appeared in the January 25 issue of the New York Law Journal. The authors discuss the Second Circuit’s recent review of the government’s decision to dismiss an insider trading conviction in United States v. Blaszcazk in light of the Supreme Court’s 2020 decision in Kelly v. United States, which narrowed the definition of “property” for purposes of certain federal criminal statutes. In Blaszcazk II, a majority of the panel concluded that certain insider trad­ing statutes are not violated by a scheme to misappropriate confidential government information that is regulatory in nature because the government has no property interest in that information. Taken together, the Supreme Court’s decision in Kelly and the Second Circuit’s decision in Blaszcazk II make it clear that the government is constrained when prosecuting insider trading cases where individuals have misappropriated government information that, although confidential, has no direct economic value to the government. Litigation associate Taeler Lanser assisted in the preparation of this column.

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