As discussed in our prior blog post, earlier this year the Supreme Court vacated and remanded the Second Circuit’s decision in a high-profile insider trading case, United States v. Blaszczak,[1] for reconsideration in light of the Supreme Court’s “Bridgegate” decision in Kelly v. United States.[2]  In Blaszczak, the Second Circuit had previously found that a government agency’s confidential pre-decisional information constituted “property” under Title 18, and that therefore the Blaszczak defendants had committed fraud under the applicable statutes when they obtained the information and traded on it.[3]  However, following that decision, the Supreme Court held in Kelly that a government regulatory interest did not constitute “property” for the purpose of Title 18 fraud statutes.[4]  The Blaszczak defendants filed a petition for certiorari, contending that the Second Circuit’s reading of Title 18 could not be reconciled with the Supreme Court’s holding.[5]  After the Blaszczak defendants filed their petition, the government consented to a remand to the Second Circuit.

The Department of Justice Brief

On April 2, 2021, the Department of Justice (“DOJ”) filed a post-remand brief in the Second Circuit to reflect its “post-Kelly position.”[6]  Despite potential arguments it could have made to distinguish Kelly, the DOJ unexpectedly concluded that “the confidential information at issue [in Blaszczak] does not constitute ‘property’ or a ‘thing of value’ under the relevant statutes after Kelly” and that the Blaszczak defendants’ Title 18 convictions should accordingly be reversed.[7]  As to the remaining convictions, including for Title 15 securities fraud and conspiracy to defraud the United States under 18 U.S.C. § 371 that the government asserted were unaffected by Kelly, the DOJ asked the Second Circuit to affirm.[8]

The brief further stated that more broadly “it is now the position of the [DOJ] that in a case involving confidential government information, that information typically must have economic value in the hands of the relevant government entity to constitute ‘property’ for purposes of 18 U.S.C. Sections 1343 and 1348.”[9]  The DOJ additionally acknowledged that “[a] related, though not necessarily identical, analysis applies when determining what confidential information is a ‘thing of value’ under 18 U.S.C. § 641.”[10]

Although the DOJ asserted that the government agency in Blaszczak did have an economic interest because it “invests time and resources into generating and maintaining the confidentiality of” the pre-decisional information, and because any leaks of the information affect the “efficient use of its limited time and resources,” it conceded that employee time “did not constitute ‘an object of the fraud,’ and thus the associated ‘labor costs could not sustain the [Blaszczak] conviction[s].’”[11]


Immediately following the filing of the government’s brief, Christopher Worrall, one of the Blaszczak defendants, moved to “reverse [his] conviction and vacate his sentence in light of the government’s confession of error with respect to the only two counts on which he was convicted.”[12]  The remaining defendants have also responded, contesting the government’s arguments on the two counts the DOJ asked the Second Circuit to affirm.[13]

While the DOJ’s new position continues to play out in Blaszczak, there will likely be longer lasting implications for political intelligence insider trading cases.  The DOJ’s admission that the only economic interest in pre-decisional information is the “time and resources” to maintain its confidentiality likely puts an end to the prosecution of political intelligence insider trading cases under Title 18 property fraud and conversion statutes.  Instead, prosecutors will be left only with the more burdensome elements of Title 15.

The second key holding in Blaszczak is also impacted by the DOJ’s position.  In light of the “confession of error” as to Title 18 under Kelly’s definition of property, the DOJ took the position that the Second Circuit need not address on remand whether the “personal benefit” test applies to the Title 18 charges in Blaszczak.[14]  In light of the Supreme Court’s reversal and remand, along with the government’s abandonment of the Title 18 convictions, the Second Circuit panel’s prior holding that no “personal benefit” was required for an insider trading conviction under Title 18 will likely no longer be law of the Circuit.  In their Supreme Court briefing, defendants warned that even if the Second Circuit reversed its property holding position on remand, the “personal benefit” holding “would remain unaddressed” under the shadow of the Second Circuit’s “not technically binding” “personal benefit” decision, which in turn, would encourage “prosecutors in the Second Circuit [to] continue to feel free to charge insider-trading crimes even where there is no proof of personal benefit.”[15]  The defendants predicted that this scenario “would produce exactly the unfairness to individual defendants and chilling effect on market analysts that the personal-benefit requirement exists to prevent.”[16]

The Second Circuit will hear arguments in Blaszczak later this month.  Even after that case is resolved, it remains to be seen whether the government continues to pursue insider trading cases under Title 18 and whether the long-running debate over the “personal benefit” test will continue.

[1] 947 F.3d 19, 26-28 (2d Cir. 2019).

[2] United States v. Blaszczak, No. 20-5649, ___ S. Ct. ____, 2021 WL 78043 (Jan. 11, 2021); United States v. Olan, No. 20-306, ___ S. Ct. ____, 2021 WL 78042 (Jan. 11, 2021).

[3] See Blaszczak, 947 F.3d at 32-34.

[4] Kelly v. United States, 140 S. Ct. 1565, 1568-69 (2020).

[5] See Petition for Writ of Certiorari, at 13, 24, Olan v. United States, No. 20-306 (Sept. 4, 2020).

[6] Brief on Remand for the United States of America at 2, No. 18-2811 (L), ECF No. 453 (Apr. 2, 2021).

[7] Id. at 2, 8-9.  The DOJ conceded that the Second Circuit should reverse the Title 18 property fraud and conversion convictions, including counts for wire fraud and conspiracies to commit wire fraud, securities fraud, and conversion of United States property.

[8] Id. at 9.

[9] Id. at 7.

[10] Id. at 8.

[11] Id. (citing Kelly, 140 S. Ct. at 1573).

[12] Affirmation in Support of Emergency Motion of Christopher Worrall to Reverse His Conviction and Vacate His Sentence at 2, No. 18-2811 (L), ECF No. 454 (Apr. 5, 2021).

[13] Appellants’ Joint Reply Brief on Remand, No. 18-2811 (L), ECF No. 466, 467 (Apr. 12, 2021).

[14] Brief on Remand for the United States of America at 9, No. 18-2811 (L), ECF No. 453 (Apr. 2, 2021).

[15] Reply Brief for Petitioners at 2-3, Olan v. United States, No. 20-306 (Dec. 8, 2020).

[16] Id.  Some uncertainty around the insider trading elements could be addressed if the potential bill to “eliminate ambiguities” in insider trading law gains traction again in the Senate after passing in the House in December 2019.  The Insider Trading Prohibition Act (HR 2534), a bipartisan insider trading bill, seeks to clarify Title 15 by, for example, focusing on information that is “wrongfully” obtained as opposed to the current law focused on fraud or deception.