On September 28, 2016, Amy Howe wrote on SCOTUSBlog about a troubling trend in the federal prosecution of insider-trading cases. Instead of going after high-profile Wall Street traders, federal prosecutors have been targeting recipients of third-hand stock tips. In Salmon v. United States, which is scheduled for oral argument on October 5, 2016, Supreme Court Justices will interpret "personal benefits" and whether they are limited to financial gain for the insider, or extend to a "gift" of confidential information.
Chicago grocery wholesaler Basam Salman was convicted of insider trading based on information he received from his brother-in-law's older brother, an investment banker at Citigroup. Salman used the information to buy stock in several companies, which netted him hundreds of thousands of dollars.
Salman's lawyers contend that upholding a conviction for insider trading would over-criminalize conduct that Congress never intended to make a crime, and would give prosecutors free reign any time a Wall Street insider passes information to a friend or relative. Federal prosecutors, on the other hand, argue that overturning Salman's conviction will worsen inequities in the stock market by tacitly encouraging insiders to pass confidential information to family and friends.
Both sides have unusual bedfellows. Activist group Occupy the SEC filed a "friend of the court" brief that sides with the federal government and claims that "securities markets are rigged in favor of the well-connected and influential," noting that 25% of mergers and acquisitions suffer from insider trading. Salman has the support of billionaire owner of the Dallas Mavericks Mark Cuban, who was himself indicted on charges of insider trading and spent millions of dollars defending himself only to be acquitted after only four hours of jury deliberation. Cuban cautions that most people lack the resources to defend themselves against charges of insider trading and will simply acquiesce to a settlement while not believing they violated the law.
The unfortunate reality is that many people, faced with the vast and virtually limitless resources of the federal government arrayed against them, lack the resources and tenacity to defend themselves.
Read the full article by Amy Howe on SCOTUSBlog: "Argument preview: Justices to consider what constitutes a 'personal benefit' in insider trading"