DOJ May Face Difficulties Extraditing Remaining Defendants in International Insider Trading Ring

5 minute read | March.18.2020

The ongoing prosecution in Manhattan of seven defendants in an international insider trading scheme will test the government’s ability to bring international defendants within U.S. jurisdiction. While the government has, at this point, secured two guilty pleas and a conviction, it is unclear whether prosecutors will ever be able to secure the extradition of four remaining defendants scattered throughout Europe and Asia.

Prosecutors have had mixed results so far. Although the DOJ succeeded in extraditing one defendant from Serbia, another is fighting extradition, and a third previously beat extradition on a foreign law technicality. As the latter two cases demonstrate, it is becoming harder and harder to extradite individuals to the United States to stand trial, with foreign courts increasingly willing to stand in the way.

SDNY insider trading prosecution

In 2019, U.S. prosecutors charged seven defendants in the United States, Europe, and Thailand with participating in a years-long insider tipping ring that the government claimed netted tens of millions of dollars in illegal profits. In the first — and to date, only — trial, the jury on Jan. 15 found entrepreneur Telemaque Lavidas guilty. That trial featured the testimony of cooperating witness and second defendant Marc Demane-Debih, who in October 2019 pleaded guilty in connection with the scheme, five months after the U.S. government successfully extradited him from Serbia.

A third defendant, former Goldman Sachs investment banker Bryan Cohen, pleaded guilty on Jan. 7. Trials of the other four defendants will hinge on whether U.S. prosecutors first can secure their extradition.

The four remaining defendants

Despite successfully extraditing Demane-Debih, prosecutors may have trouble getting the other four defendants to appear in a U.S. courtroom. In October 2019, the DOJ failed to extradite defendant Benjamin Taylor from Monaco, after it filed the formal extradition request in the wrong language and without a French translation. By the time the U.S. filed an amended request, Taylor, a former investment banker based in London, had fled to his native France. France does not extradite its nationals, and there is no indication that the U.S. has requested it.

Taylor’s fellow defendant, former London-based investment banker Darina Windsor, is reportedly at large in her native Thailand. Thailand will only extradite its nationals in exceptional circumstances, such as for political or military offenses. The sixth defendant, Greek trader and businessman Georgios Nikas, also has been charged but is not in custody. He is reportedly at large in his native Greece, which also generally does not extradite its citizens. There is no indication so far that the U.S. has filed formal extradition requests with Thailand or Greece.

Assuming the DOJ does not charge additional individuals or unseal further indictments in the case, it may have just one more shot for another trial and possible conviction, with its request to extradite former securities trader Joseph El-Khouri, a dual Lebanese-UK citizen who was arrested in the UK in October 2019.

UK courts have recently been less accommodating of extradition requests

Extradition, even from U.S. allies like the UK, is not a foregone conclusion. In 2018, for example, the High Court of England and Wales refused to extradite two UK citizens in cases that show the uphill battle the DOJ may face in seeking UK citizens’ extradition.

In both cases, the High Court applied a relatively new provision known as the “forum bar,” which was added to the UK Extradition Act in 2013 for cases in which a significant portion of the defendant’s alleged misconduct occurred in the UK. The High Court found that a defendant’s strong connections to the UK are a factor weighing against extradition, including in the first case, where the defendant was a British national, a long-term British resident, had connections to family and a girlfriend in England, and was studying and receiving medical treatment in England. Love v. United States, [2018] EWHC 172 (Admin) [22] (Eng.). The High Court also credited other arguments frequently made by foreign defendants fighting extradition, including that the defendant’s physical and mental condition would render him unfit to stand trial if extradited.

In the second case, the High Court found that the place of most of the loss or harm was a “very weighty factor” against extradition and rejected the idea of crediting harm to the U.S. from the alleged conduct, where such harm was merely unquantified damage to the U.S. financial markets based on dollar transactions routed through U.S. jurisdiction. Scott v. United States, [2018] EWHC 2021 (Admin) [23] (Eng.).

Many of these same arguments may come into play as the U.S. continues to seek El-Khouri’s extradition. The U.S. will have to overcome the fact that the majority of the alleged conduct appears to have occurred in the UK, with only one trip to the U.S. and one overt act in New York alleged by the DOJ. The U.S. may also have difficulty quantifying the damage to the U.S., a factor in Scott, and overcoming issues of El-Khouri’s documented poor health, a factor in Love.

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The DOJ faces numerous obstacles in getting any of the four remaining defendants in this high-profile international insider trading ring to appear in the U.S. Extradition is certainly possible for foreign defendants, but UK courts, for one, seem to be handing more tools to UK nationals to resist extradition, reducing the likelihood that the final defendant ever sees a SDNY courtroom.