United States v. Bray, 853 F.3d 18

Background

Bray, an Oakley Country Club member, received a handwritten tip from fellow member John O'Neill (an Eastern Bank executive) that "Wainwright" could be a takeover target; O'Neill had a confidentiality duty to Eastern regarding nonpublic takeover information.
Bray immediately placed large orders for Wainwright stock (31,000 shares over two weeks), funding purchases by liquidating other holdings; Wainwright was thinly traded and the purchases were atypically large for Bray.
Eastern announced acquisition of Wainwright; Bray profited roughly $300,000 when the acquisition closed; Bray thanked O'Neill and offered him investment in a real-estate project (the Watertown Project), an offer O'Neill later declined.
FINRA investigated pre-announcement trading; O'Neill panicked when Bray’s name surfaced and told Bray he could lose his job; Bray downplayed any disclosure and later helped craft cover stories.
SEC brought a civil action; the government later criminally charged Bray with securities fraud (15 U.S.C. §§ 78j(b), 78ff) and conspiracy; at trial the jury convicted Bray of securities fraud but acquitted on conspiracy; he was sentenced to 24 months imprisonment and fined $1 million.

Issues

Issue	Plaintiff's Argument (Bray)	Defendant's Argument (Gov't)	Held
Whether evidence proved O'Neill expected a personal benefit from tipping	No — relationship was not shown to be close enough or quid pro quo sufficient to infer benefit	Yes — friendship, favors, and O'Neill’s testimony about enhancing reputation/support supply sufficient to infer expectance of a personal benefit	Court: Sufficient evidence to infer O'Neill expected a personal benefit; conviction affirmed
Whether Bray knew tipper expected a benefit / that disclosure breached fiduciary duty (scienter)	No — government failed to prove Bray knew O'Neill sought a benefit or breached a duty	Yes — circumstantial evidence (relationship, furtive receipt of tip, immediate large trades, post-event offers to O'Neill) supported knowledge/willfulness	Court: Sufficient evidence that Bray knew of the expected benefit and breach; scienter proven beyond reasonable doubt
Whether jury instruction allowing conviction if Bray “knew or should have known” the tip was a breach was legal error	Instruction lowered mens rea to negligence and thus violated requirement to prove knowing/willful conduct	Government: Instruction was supported by record and Bray invited similar language; any error harmless given strong evidence	Court: Instruction was clear error under later precedents but harmless under plain-error review given overwhelming evidence; conviction stands
Whether willful-blindness instruction was proper or equated to negligence	Instruction improperly equated willful blindness with negligence	Government: Instruction adequate; overall charge emphasized willfulness	Court: Instruction misstated willful blindness scope, but error did not satisfy plain-error fourth-prong given trial evidence; conviction affirmed

Key Cases Cited

Salman v. United States, 137 S. Ct. 420 (2016) (tippee liability where tipper gifts inside information to relative/friend; personal benefit requirement discussed)
O'Hagan v. United States, 521 U.S. 642 (1997) (misappropriation theory of insider trading)
Dirks v. SEC, 463 U.S. 646 (1983) (tipping doctrine: personal benefit to tipper is required for tippee liability)
McPhail v. United States, 831 F.3d 1 (1st Cir. 2016) (discussing knowledge instruction error and tipping facts among country-club members)
Parigian v. United States, 824 F.3d 5 (1st Cir. 2016) (addressing personal-benefit and mens rea issues in tipping cases)
Newman v. United States, 773 F.3d 438 (2d Cir. 2014) (requiring "meaningfully close" relationship to infer personal benefit; later addressed by Salman)
Global-Tech Appliances, Inc. v. SEB S.A., 563 U.S. 754 (2011) (defining willful blindness as distinct from negligence)
Delgado-Marrero v. United States, 744 F.3d 167 (1st Cir. 2014) (plain-error reversal where evidence on contested element was not overwhelming)