The U.S. Supreme Court declined Monday to consider the fate of a potent weapon federal prosecutors have used to crack down on Wall Street fraud.
The court said it will not hear the case of two hedge fund traders accused of illegally earning $72 million by acting on insider information that was not available to the general public.
Prosecutors said Todd Newman and Anthony Chiasson were at the end of a chain of insider tips from corporate investor analysts about the quarterly earnings of two technology companies. The two were found guilty in 2012, but a federal appeals court threw their convictions out.
The appeals court said the government failed to prove that the original tipsters who passed along the inside information had at least the potential of receiving something tangible in return. Circumstantial evidence alone, the appeals court said, wasn't enough — nor was it enough to prove that tipsters acted out of friendship.
"The effect of the new rule will be to hurt market participants, disadvantage scrupulous market analysts, and impair the government's ability to protect the fairness and integrity of the securities markets," U.S. Solicitor General Donald Verrilli said in urging the court to take the case.