In 2013, Todd Newman, a former portfolio manager at hedge fund Diamondback Capital Management LLC, and Anthony Chiasson, formerly of Level Global Investors, a hedge fund he co-founded, were found guilty of insider trading and sentenced to prison terms of four and a half years and six and a half years, respectively. The inside information, which concerned the companies Dell Computer and Nvidia, was passed through a number of individuals before it ultimately reached Newman and Chiasson, who were thus remote tippees. Allegedly, a group of analysts (referred to by the government as a "criminal club") obtained the information from insiders of the companies and then passed the information to others. The government alleged that by the time the information reached Newman and Chiasson, they knew that it came from "someone on the inside who must have been violating a duty to keep it confidential, which means that trading on it was a crime." Newman and Chiasson appealed, arguing that the jury instructions were erroneous because they did not instruct that a conviction required that the defendant knew the information received "originated with a corporate insider who disclosed it in breach of a fiduciary duty and for a personal benefit." Instead, they argued, the court incorrectly relied on SEC v. Obus, 693 F.3d 276 (2d Cir. 2012), which does not require that a tippee knew the insider received a personal benefit for passing the information.

Some commentators have argued that if the defendants prevail, hedge fund managers "will be given a road map to evading the insider trading laws" because they will be careful not to ask whether any benefits were provided for the information. Do you think it should matter whether a tippee knows that the insider received a benefit for revealing the information? What constitutes a "personal benefit"? How should a court "measure" whether a benefit has been received if the benefit is not a cash payment?