773 F.3d 438 (2014)
On January 18, 2012, the Government unsealed charges against Todd Newman and Anthony Chiasson.1 On February 7, 2012, a grand jury returned an indictment, and on August 28, 2012, a twelve-count superseding indictment was filed in the United States District Court for the Southern District of New York charging Newman and Chiasson with conspiracy to commit securities fraud and multiple substantive counts of securities fraud arising from trading in Dell and NVIDIA securities.2
The Government alleged that analysts obtained material nonpublic earnings information from insiders at Dell and NVIDIA and passed it through multiple levels to portfolio managers at hedge funds.3 Newman served as a portfolio manager at Diamondback Capital Management and Chiasson served as a portfolio manager at Level Global Investors.4 The Dell chain ran from Rob Ray in Dell's investor relations department to Sandy Goyal at Neuberger Berman to Jesse Tortora at Diamondback, who relayed the information to Newman and to Sam Adondakis at Level Global, who then passed it to Chiasson.5 The NVIDIA chain ran from Chris Choi in NVIDIA's finance unit to Hyung Lim to Danny Kuo at Whittier Trust, who circulated it among analysts including Tortora and Adondakis before it reached Newman and Chiasson.6
Newman and Chiasson stood three and four levels removed from the Dell insider and four levels removed from the NVIDIA insiders.7 The trades generated approximately $4 million in profits for Diamondback and $68 million in profits for Level Global.8 No evidence showed that Newman or Chiasson knew the identity of the corporate insiders or whether any personal benefit had been provided to the insiders.9
At the close of a six-week jury trial before Judge Richard J. Sullivan, Newman and Chiasson moved for judgment of acquittal under Federal Rule of Criminal Procedure 29, arguing insufficient evidence on the personal benefit element and on their own knowledge.10 The district court reserved decision. On December 17, 2012, the jury returned guilty verdicts on all counts.11 The district court subsequently denied the Rule 29 motions.12 Newman was sentenced on May 2, 2013, to 54 months' imprisonment, a $1 million fine, and forfeiture of $737,724.13 Chiasson was sentenced on May 13, 2013, to 78 months' imprisonment, a $5 million fine, and forfeiture not to exceed $2 million.14 Both defendants appealed to the United States Court of Appeals for the Second Circuit.15
Whether the district court erred by failing to instruct the jury that a tippee must know the insider disclosed confidential information in exchange for a personal benefit?16
Under Dirks v. SEC, a tippee may be held liable for insider trading only when the insider has breached his fiduciary duty by disclosing confidential information in exchange for a personal benefit and the tippee knows or should know of that breach, which requires knowledge that the disclosure was for personal benefit.17
Yes. The district court correctly instructed the jury that the government must prove the defendant knew the material nonpublic information had been disclosed by the insider in breach of a duty of trust and confidence.18 However, it failed to require proof that the defendant knew the insider received a personal benefit in exchange for the disclosure.19 Newman and Chiasson specifically requested an instruction to that effect, but the district court denied the request, relying on its reading of Obus.20
As a result, the jury convicted Newman and Chiasson without finding that essential element of tippee liability.21
The district court erred in failing to instruct the jury on the tippee's knowledge of the personal benefit.22
Whether the evidence was sufficient to establish that the corporate insiders at Dell and NVIDIA received a personal benefit in exchange for disclosing material nonpublic information?23
A personal benefit to the tipper may be inferred from a meaningfully close personal relationship that generates an exchange that is objective, consequential, and represents at least a potential gain of a pecuniary or similarly valuable nature, but not from mere friendship or casual social relationship without evidence of quid pro quo.24
The evidence was insufficient to establish that the corporate insiders received a personal benefit.29
Whether the evidence was sufficient to establish that Newman and Chiasson knew the information originated from corporate insiders who had received a personal benefit for the disclosures?30
To sustain an insider trading conviction against a tippee, the Government must prove beyond a reasonable doubt that the tippee knew the insiders received a personal benefit in exchange for disclosing confidential information.31
No. The Government was required to prove beyond a reasonable doubt that Newman and Chiasson knew the insiders received a personal benefit in exchange for disclosing confidential information.32 Newman and Chiasson stood three and four levels removed from the insiders.33 No evidence showed they knew the insiders' identities.34 No evidence showed they knew any personal benefit had been provided.35 Even the first-level analysts lacked such knowledge.36 Adondakis and Tortora disavowed any awareness of personal benefits to the insiders.37
The evidence was insufficient to establish that Newman and Chiasson knew the insiders received a personal benefit.38