A man that formerly worked as a stockbroker who had a guilty plea to criminal charges involving insider trading thrown out is also looking to exonerate himself in a civil matter related to his case.
According to Bloomberg, an attorney for Thomas Conradt argued on Tuesday (August 15th) that Judge Jed Rakoff of the U.S. District Court for the Southern District of New York was supposed to overturn Conradt’s nearly $1 million-dollar civil settlement with the Securities and Exchange Commission after the government’s criminal case collapsed.
Conradt and his legal representative additionally claimed that Judge Rakoff’s fine of nearly one million dollars was “massive and disproportionate.” Rakoff slapped the fine on Conradt after ruling that the former stockbroker did not follow the guidelines of the settlement agreement with the Securities and Exchange Commission.
The government’s case against Conradt came apart due to the end result of United States v. Newman. In this case, the U.S. Court of Appeals for the Second Circuit made it much for difficult to hold “downstream tippees” (such as Conradt) financially liable in these kinds of cases.
In the case of United States v. Newman, the appellate court dismissed criminal convictions of insider trading, which were leveled against two executives who worked in the hedge fund industry. The federal court of appeals determined that whoever received the insider trading information did not personally benefit from it.
If the U.S. government would have been able to prove such an occurrence, the convictions in the United States v. Newman case would have able to stand.
“This is a very important opportunity for the Second Circuit to clarify the ‘knowledge’ standard for tippee liability with respect to matters such as ‘conscious avoidance,’ and to address the differences in standard of proof in civil as opposed to criminal cases,” Donald Langevoort told Bloomberg.
Langevoort is a professor at Georgetown University Law Center. He has thoroughly studied insider trading and many of the landmark cases surrounding it. John Coffee Jr., a professor at Columbia Law School also spoke with Bloomberg about his knowledge of case law involving insider trading as well.
However, Coffee said in his Bloomberg interview that Conradt’s case provided limited guidance as it pertains to United States v. Newman. “This case may largely duck the insider trading issues and go off on procedural issues about the plea agreement,” Coffee told Bloomberg.
Attempts by Bloomberg to interview a spokesperson for the Securities and Exchange commission were unsuccessful.