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On June 21, 2019, Judge Paul G. Gardephe of the Southern District of New York vacated the guilty plea of Richard Lee, a former manager at SAC Capital. Lee had pleaded guilty in 2013 to insider trading, related to the purchase of Yahoo stock based on insider tips about imminent collaboration between Yahoo and Microsoft. Judge Gardephe vacated Lee’s guilty plea because his plea allocution did not establish his knowledge of any “personal benefit” that corporate insiders received as a result of providing him with this confidential information. Judge Gardephe concluded that “under the unusual circumstances of this case,” namely the fact that the personal benefit test had been changed so drastically by the Second Circuit and the Supreme Court between Lee’s plea and sentencing, his plea could not stand. Unfortunately for Lee, however, it is too early to celebrate. Given the significant weakening of the personal benefit test since 2013, the likelihood that prosecutors will be able to satisfy this requirement to prove Lee’s guilt is high.

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