US prosecutors have conceded Australian research analyst Trent Martin and his four co-accused should have their charges dismissed if a judge believes a landmark ruling in an unrelated insider trading matter applies to their case.
It is a striking turnaround in the high-profile prosecution that sent tremors through Wall Street.
Martin and three of the four New York co-accused stockbrokers entered guilty pleas months ago and were facing potential jail sentences.
They could be free as early as Friday when US District Court judge Andrew Carter holds a conference in a Manhattan courtroom.
Martin and his co-accused’s fortunes changed last month when an appeals court overturned the convictions of hedge fund managers Todd Newman and Anthony Chiasson in another major New York insider trading prosecution.
“If the court concludes that Newman’s benefit requirement applies to this case, and vacates their guilty pleas, the court should dismiss their charges as well,” prosecutors in the Martin case wrote in a letter to Judge Carter.
The alleged insider trading dates back to 2009 and IBM’s secret $US1.2 billion takeover of Chicago software company SPSS.
Martin was living in Manhattan and working at the Royal Bank of Scotland.
His friend, a New Zealand lawyer working in New York on the IBM deal, allegedly confided to Martin about the takeover and how IBM would acquire SPSS for a significant premium.
Martin allegedly betrayed his friend’s trust, bought SPSS stock and told his room-mate, stockbroker Thomas Conradt, who worked at Euro Pacific Capital.
Conradt then allegedly told his colleague David Weishaus and the tip spread to two other Euro brokers, Daryl Payton and Benjamin Durant.
SPSS’s common stock rose 41 per cent when IBM’s acquisition was announced.
Prosecutors allege Durant pocketed $US625,000, Payton $US250,000, Weishaus $120,000, Martin $US9,000 and Conradt $US2,500.
The appeals court in the Newman case ruled prosecutors must prove that the person who received the tip knew that an insider had disclosed confidential information and did so in exchange for a personal benefit.
Durant was the only accused who did not plead guilty.
Martin entered a guilty plea to conspiracy to commit securities fraud and faced a five-year jail sentence.
