On Feb. 19, a U.S. Court of Appeals for the Second Circuit panel passed on an opportunity to address an issue in insider trading law on which two of the Southern District’s most prominent judges have reached opposite conclusions. The issue is whether a tippee who trades on inside information must know that the insider who tipped the information received a personal benefit for doing so. In United States v. Whitman—the case decided by the Second Circuit in February—Judge Jed Rakoff ruled that the answer is yes.1
In another case that the Second Circuit will hear in April, United States v. Newman, Judge Richard Sullivan held that the answer is no. The panel in the Whitman appeal (of Judges Jon O. Newman, Peter W. Hall, and Gerard E. Lynch), found that it did not need to reach the tippee-knowledge issue because the defendant was convicted despite getting the benefit of Rakoff’s more pro-defendant instruction. It affirmed Doug Whitman’s conviction in a non-precedential summary order,2 leaving it to the panel in the Newman appeal to resolve the disagreement.
Chains of Tippers and Tippees
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