929 F.3d 63
2d Cir.2019Background
- John Afriyie, an MSD Capital analyst, accessed nonpublic Apollo/ADT deal documents and purchased ADT call options in January–February 2016 in violation of MSD’s trading restrictions.
- Apollo announced its acquisition of ADT on Feb 16, 2016; ADT stock rose ~47.5% and Afriyie realized about $1,564,071.60 in trading profits.
- Afriyie was indicted on securities fraud (15 U.S.C. §§ 78j(b), 78ff; 17 C.F.R. § 240.10b-5) and wire fraud (18 U.S.C. § 1343); convicted after a one-week jury trial.
- District court sentenced Afriyie to 45 months imprisonment, ordered forfeiture of $2,780,720.02 (including account appreciation) and restitution of $663,028.92 to MSD.
- On appeal, Afriyie challenged jury instructions, admission of lay testimony, loss/forfeiture calculations, and restitution; the Second Circuit affirmed conviction and forfeiture, vacated restitution for recalculation in light of Lagos v. United States.
Issues
| Issue | Plaintiff's Argument (Government) | Defendant's Argument (Afriyie) | Held |
|---|---|---|---|
| Adequacy of jury instructions on fiduciary duty and burden of proof | Instructions adequately explained trust/confidence and burden; good-faith defense explained | District court failed to define fiduciary duty (Chestman standard) and to reiterate government’s burden; prejudice | No reversible error; instructions sufficient and not prejudicial (plain-error review) |
| Admission of lay testimony about nonpublic status, deal likelihood, pricing | Employee Grover had firsthand knowledge and could give limited lay opinions grounded in his role | Grover testified beyond lay scope, offering expertized opinions without foundation | No plain error; testimony admissible under Rule 701 given firsthand involvement; any specialized parts were harmless |
| Loss calculation for Sentencing Guideline enhancement | Guideline loss based on full $1.53M trading gain as unitary scheme; district court independently found schemewide conduct | General jury verdict requires sentencing be based on least-punitive possible verdict or higher clear-and-convincing standard | Affirmed: district court’s unitary-scheme finding and use of preponderance standard not clearly erroneous |
| Forfeiture scope: whether appreciation of crime proceeds is forfeitable | Proceeds include money acquired and property "derived from proceeds traceable"; appreciation of criminal proceeds is forfeitable | Forfeiture should be limited to original funds acquired by illegal trades, excluding subsequent appreciation | Affirmed: statutory text (18 U.S.C. §§ 981(a)(1)(C), 981(a)(2)(B)) allows forfeiture of appreciation "derived from" proceeds |
Key Cases Cited
- United States v. Chestman, 947 F.2d 551 (2d Cir. 1991) (defines misappropriation/fiduciary-duty standard for insider trading)
- United States v. Contorinis, 692 F.3d 136 (2d Cir. 2012) (defines "proceeds" for securities-fraud forfeiture)
- Lagos v. United States, 138 S. Ct. 1684 (U.S. 2018) (limits categories of victim expenses recoverable under the MVRA)
- United States v. Sturdivant, 244 F.3d 71 (2d Cir. 2001) (general-verdict sentencing issues; least-punitive-possible-verdict principle)