The White Collar Appeal: Ciminelli Continues to Confound in a Trio of Second Circuit Decisions

• The Second Circuit is still sorting out the boundaries of wire fraud after the 2023 decision in Ciminelli v. United States, in which the Supreme Court held that federal wire fraud applies to schemes to obtain money or other traditional property interests, not an intangible “right to control” information. 
• In three decisions in July, the Second Circuit reached varied results:  in United States v. Hild, the court identified a Ciminelli error but nevertheless affirmed the defendant’s conviction; the next day, the court identified a Ciminelli error and vacated the conviction in United States v. Chastain; and earlier in the month, in Johnson v. United States, the court took the extraordinary step of reversing a district court’s denial of coram nobis.
• Despite the differing outcomes, the rulings demonstrate the Second Circuit’s continuing efforts to cabin federal fraud prosecutions, axing right-to-control theories while protecting prosecutions that have a strong basis in traditional fraud theories.  These decisions thus create opportunities for defendants to exploit—and expand upon—these new hurdles to federal fraud prosecutions, including by seeking to exclude government evidence or by baiting the government into focusing on issues that ultimately favor the defense.

Background

Ciminelli v. United States, 598 U.S. 206 (2023).  This case involved a New York real estate developer who, with the help of a well-placed lobbyist and the head of a nonprofit development company, was able to influence the composition of a request for proposal such that Ciminelli’s company would be uniquely qualified to win the bid. The government’s theory was that Ciminelli defrauded the nonprofit by “depriv[ing it] of potentially valuable economic information that it would consider valuable in deciding how to use its assets.” The Supreme Court reversed and held that this kind of right-to-control theory—under which the government can establish federal wire fraud by showing that the defendant schemed to deprive a victim of potentially valuable economic information necessary to make discretionary economic decisions—was not sufficient to support a conviction because the right to such information is not a traditional property interest.

Johnson v. United States, No. 24-1211 (2d Cir. July 17, 2025).  Mark Johnson, former global head of HSBC’s foreign exchange trading desk, was convicted of wire fraud and conspiracy related to a 2011 Dollars-to-Pounds transaction that HSBC conducted with Cairn Energy.  The gravamen of the alleged fraud was that, just before setting the exchange rate for the Cairn transaction, HSBC bought a significant amount of Pounds, which caused a change in the exchange rate that favored HSBC.  The government presented two fraud theories at trial: (1) a right-to-control theory, arguing Johnson misled Cairn about HSBC’s trading practices, and (2) a traditional property theory, arguing that Johnson breached a fiduciary duty to Cairn by using confidential information about the transaction to affect the exchange rate to HSBC’s benefit and Cairn’s detriment.  The Supreme Court decided Ciminelli two days before Johnson finished his prison sentence, and he promptly filed a petition for a writ of coram nobis.  The district court denied Johnson’s petition, concluding that the jury would have convicted him under the misappropriation theory anyway, rendering the right-to-control error harmless.

United States v. Hild, No. 23-6136 (2d Cir. July 30, 2025).  Michael Hild was the CEO of Live Well Financial.  Live Well obtained working capital by using the company’s bonds as collateral.  When the value of the company’s bonds increased, Live Well could obtain financing on better terms; when the value of the bonds decreased, Live Well got worse terms. But because the market for Live Well bonds was illiquid, the lenders had to rely on a third-party valuation company to determine the price of the bonds.  What the lenders didn’t know, however, was that the third-party valuation company set the price of the bonds based, at least in part, on what Live Well said the value of bonds was.  According to the government, Live Well eventually began to submit unjustified price estimates to the valuation company, borrowed against those inflated prices, then bought the bonds at the lower (true) price and pocketed the profit.  At trial, the district court instructed the jury that the government must “prove that the alleged scheme contemplated depriving another of money or property,” and that “a person is not deprived of money or property only when someone directly takes his money or property,” but also “when he is deprived of a right to control that money or property.”  The jury convicted, and Hild appealed on the basis that the instruction was invalid under Ciminelli.

United States v. Chastain, No. 23-7028 (2d Cir. July 31, 2025).  Nathanial Chastain worked at OpenSea, a website that sought to popularize non-fungible tokens (NFTs) and provide a platform for users to trade them.  On its website, OpenSea featured certain NFTs prominently, which usually led to an increase in the price of those NFTs.  In his role as head of product, Chastain knew beforehand which NFTs OpenSea would feature on the site, and on a few occasions, he purchased the NFT before it went up and sold it afterwards, when the price increased.  In total, he made $57,000.  The government argued that Chastain’s advance knowledge of which NFTs would be featured constituted OpenSea’s confidential business information and property. At trial, the government elicited testimony that the company did not make any money on the featured NFTs beyond its standard commission and that featuring NFTs was tangential to OpenSea’s business.  The district court instructed the jury that Chastain could be guilty of wire fraud if he misappropriated OpenSea’s confidential business information, because “a company’s confidential business information is a type of property” regardless of whether the government proved that such “information had [economic] value.”

Holdings

In each case, the Second Circuit identified error under Ciminelli.  Yet it affirmed the conviction in one case, vacated a conviction in another, and took the extraordinary step of granting a writ of coram nobis in a third. 

In Hild, the court acknowledged that (1) the district court improperly instructed the jury that it constitutes wire fraud to “deprive[ someone] of a right to control … money or property,” and (2) the government emphasized that Hild misled the lenders into believing that they were receiving third-party pricing for Live Well’s collateral.  Yet the court held the erroneous instruction was harmless because the government’s “primary theory” was “that Hild cheated lenders out of their money by overstating the market value of Live Well’s collateral,” a “traditional property theory” that Ciminelli endorsed.  The court reasoned that the error “might be” considered harmful if, for example, the government “had argued to the jury that … it could convict on a right-to-control theory alone,” or the evidence underlying each theory was “sufficiently distinct so as to raise reasonable doubts” that the jury might have convicted based on the improper theory.

The next day, in Chastain, a 2–1 majority held it was error to instruct the jury that misappropriation of confidential business information could serve as the basis for a fraud conviction even if there was no proof the information had economic value.  This time, however, the court reversed the conviction.  In the majority’s view, the “evidence suggest[ed] that the featured NFT information was so tangential to OpenSea’s business that it lacked commercial value to the company.”  The dissent saw no error in the district court’s instruction because “confidential business information—without more—is property under the federal wire fraud statute.” 

Meanwhile, two weeks earlier, a unanimous panel determined that HSBC trader Mark Johnson was entitled to the rare relief of a writ of coram nobis, notwithstanding that the government had—as in Hild—presented both a right-to-control and a traditional property fraud theory.  The court found that the evidence underlying the latter theory was so “complicated and contestable” that it had grave doubt whether a jury would have convicted based on that theory alone.  Remarkably, the Johnson and Hild panels—which both found Ciminelli error but resulted in opposite outcomes—were two-thirds the same:  Judges Guido Calabresi and Alison J. Nathan were on both panels and each authored one of the opinions.

Key Takeaways

Within the Second Circuit, where misappropriation of information is a component of the alleged fraud, the government must prove that the victim had an “economic interest in its exclusive use or in otherwise keeping the information confidential”—for now.  That is the upshot of the Chastain majority’s rejection of the argument that confidential business information necessarily constitutes property under the federal wire fraud statute.  But the story may not be over.  The government’s deadline to seek en banc review is not until August 14, and it is seems likely that other judges would welcome an opportunity to weigh in on this question.  The Solicitor General may also choose to petition for Supreme Court review—although it may be reluctant to do so because an unfavorable opinion would apply nationwide and not just in the Second Circuit.

Defendants should seek to preclude the government from pursuing any fraud theory that sounds in the right-to-control.  But pending further developments, defendants should seek to exploit—and expand upon—these decisions.  Defendants should move to exclude evidence and argument that they committed fraud by interfering with a victim’s exclusive right to use information.  In cases indicted prior to July, defendants should raise Sixth Amendment challenges and seek discovery to determine whether the grand jury indicted based on an impermissible theory.  And where the government is permitted to make such arguments to the jury, defendants should object to preserve the issue for future appeals.

Anyone facing a fraud charge or investigation should develop evidence that the information did not have economic value in the hands of the victim.  Harmless error ultimately drove the outcomes in Johnson, Hild, and Chastain.  Defendants thus should do whatever they can to sow doubt about the value of the information at issue so that they have persuasive arguments when it comes to harmless-error review.  This effort ideally should start during the investigation stage.  For example, defense lawyers should seek to identify, preserve, and introduce evidence that the information was tangential to the company's core business and other revenue-producing activity, that the company sought to maintain the confidentiality for purposes other than creating economic value, and that otherwise provides a compelling alternative explanation for why the company did not intend to exploit the information for commercial purposes.  Particularly where there is strong defense evidence, this strategy may have the additional benefit of forcing the government to chase shadows and litigate on the defendant's terms.

Companies should be aware that noncommercial information will not support an embezzlement or misappropriation theory of fraud. With the new economic-value requirement from Chastain, companies should protect themselves by (1) creating a record to support that their confidential information has intrinsic economic value and (2) including adequate remedies for abuse of confidential information in confidentiality agreements.

The practical impact on fraud cases nevertheless may be limited.  While these decisions signal a win for defendants by introducing new hurdles for the government, the facts in Chastain seem potentially unusual.  How many businesses maintain confidential information that is simultaneously so attenuated from the company’s economic activity but still potentially valuable when misappropriated?  Previous decisions in line with Chastain—such as Ciminelli itself, United States v. Blaszczak, 56 F.4th 230 (2d Cir. 2022), and Cleveland v. United States, 531 U.S. 12 (2000)—dealt with schemes targeting regulatory information or favorable treatment from the government, not private commercial enterprises.  It would seem likely that most cases involving commercial enterprises will resemble Carpenter v. United States, 484 U.S. 19 (1987), which involved misappropriation of information to be published in forthcoming articles in the Wall Street Journal.  Because newspapers' entire business model is to break news, it followed that such information had economic value to the Journal.