(CN) - The U.S. Supreme Court refused Monday to review a ruling that dramatically narrowed the definition of insider trading and let a hedge fund founder off the hook for $68 million in insider trades.
Since no federal law specifically defines insider trading, courts and regulators have enjoyed wide latitude in defining it for themselves but regulations and court rulings often conflict as a result.
An example of this surfaced in New York last year when the Second Circuit overturned the securities fraud convictions of Anthony Chiasson, who co-founded the hedge fund Level Global Investors, and Todd Newman, an ex-portfolio manager of Diamondback Capital Management.
In dismissing the insider trading charges against Chiasson and Newman, the Second Circuit ruled that the men needed to know that insiders at technology companies were improperly leaking confidential information to them to gain some personal benefit from their knowledge.
After the federal appeals court refused to reconsider that ruling in April, Solicitor General Donald Verrilli asked the Supreme Court to review the case.
The solicitor general said that the Second Circuit's decision created a conflict with the Ninth and Seventh Circuits, which will result in the uneven application of securities laws across jurisdictions unless the Supreme Court decides the matter.
Dealing a blow to Verrilli and U.S. Attorney Preet Bharara, the Supreme Court included the case on Monday among a list of dozens denied certiorari.
Per its custom, the court did not issue any comment on its decision.
At a six-week trial, prosecutors portrayed Chiasson and Newman as "part of a criminal club of portfolio managers and analysts" who netted $68 million and $4 million, respectively, on inside tips about Dell and Nvidia Corp.
Chiasson received a 6 1/2-year sentence in 2013, and Newman received a 4 1/2-year sentence.
In reversing their convictions, the Second Circuit found that the men were "several steps removed from the corporate insiders and there was no evidence that either was aware of the source of the inside information."
Read the Top 8
Sign up for the Top 8, a roundup of the day's top stories delivered directly to your inbox Monday through Friday.