Second Circuit doubles down on insider trading liability for corporate outsiders

The Second Circuit recently affirmed the 2018 insider trading conviction of Benjamin Chow, a corporate outsider who was found guilty of tipping his former colleague about a potential acquisition of a U.S. publicly traded company.

The case, United States v. Chow, involved allegations that Chow, a managing partner of one potential acquiror and founder of a second potential acquiror, breached non-disclosure agreements (NDAs) with the potential target company, and provided his former colleague with nonpublic information about the acquisition. No. 19-0325 (2d Cir. 2021). The Second Circuit addressed – for the second time in a year – the issue of whether the breach of a duty of confidentiality created by an NDA can form the basis for insider trading liability. Relying on its September 2020 decision in United States v. Kosinski, 976 F.3d 135 (2d Cir. 2020), the Second Circuit affirmed Chow's conviction, again ruling that a breach of an NDA can lead to insider trading liability.

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