US prosecutors have moved to bolster their case against two Wall Street stockbrokers allegedly involved in an insider trading scandal, which was sparked by a friendly conversation between a New Zealand lawyer and an Australian analyst.
The alleged insider trading took place in New York in 2009 when technology giant IBM acquired Chicago-based software company SPSS for $US1.2 billion ($A1.30 billion).
The Kiwi corporate lawyer, known in court papers as "Attorney-1", thought he could confide in his friend, Sydney-raised research analyst Trent Martin, about the stressful work he was doing on the takeover play and revealed IBM was negotiating to buy SPSS for a "significant premium".
They both lived in New York at the time.
Without the lawyer's knowledge, Martin, 35, bought SPSS common stock before the takeover was announced publicly and passed the confidential information on to his roommate, stockbroker Thomas Conradt, who then told his stockbroker colleague David Weishaus.
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Martin, Conradt and Weishaus have all admitted their roles, are believed to have become prosecution witnesses, and will be sentenced next year.
Prosecutors have focused their attention on stockbrokers Daryl Payton and Benjamin Durant who were allegedly tipped off about the IBM takeover by Conradt.
Payton pocketed $US254,000 and Durant $US53,000 in profits when they sold call options after IBM announced the takeover and SPSS stock skyrocketed 41 per cent, prosecutors allege.
In a motion to dismiss filed on October 20 and supported by Payton, Durant's lawyer David E Patton argued the prosecution's indictment "does not allege that at any time, before or even after his purchases of SPSS call options, Durant came to know that the information he received from Conradt was acquired through Martin's breach of duty to Attorney-1".
Prosecutors responded with a superseding indictment last week alleging that Conradt told Durant and Payton he "obtained the inside information from his roommate, Martin, who had instructed Conradt not to further disseminate the inside information".
Martin, who admitted to his Kiwi friend he had bought the stock, sold some of it before the IBM takeover was announced.
Martin only made $US7,900, Conradt pocketed $US2,538 while Weishaus cashed in with $US129,290.
Payton and Durant are scheduled to face a trial on December 8 in Manhattan.
