A lot of ink has been spilled over the crime of insider trading, which – in the view of U.S. District Judge Jed Rakoff – “is a straightforward concept that some courts have managed to complicate.”  In his recent decision in United States v. Pinto-Thomaz (S.D.N.Y. Dec. 6, 2018), Judge Rakoff attempts to simplify insider-trading law by returning to its roots:  embezzlement, and use of stolen property.

The Second Circuit confirmed this week that a “meaningfully close personal relationship” is not required for insider-trading liability where a tipper discloses inside information as a gift with the intent to benefit the tippee.  The June 25, 2018 decision on panel rehearing in United States v. Martoma (No. 14-3599) retreats

The Second Circuit ruled today that a “meaningfully close personal relationship” is not required for insider-trading liability where a tipper discloses inside information as a gift or in exchange for some other type of nonpecuniary personal benefit.  The requisite personal benefit exists “whenever the information was disclosed ‘with the expectation that [the recipient] would trade on it’ . . . and the disclosure ‘resemble[s] trading by the insider followed by a gift of the profits to the recipient,’ . . . whether or not there was a ‘meaningfully close personal relationship’ between the tipper and the tippee.”