Mr. Gupta, who was released from prison in 2016 after serving 19 months, argued that the conviction should be thrown out because U.S. prosecutors failed to prove he got a personal benefit for passing tips to his friend, billionaire hedge fund manager Raj Rajaratnam.
Mr. Gupta's challenge was based on a 2014 ruling by the appeals court in U.S. vs. Newman, which made it harder for prosecutors to prove insider trading. That ruling led to the dismissal of charges against Michael Steinberg, a former fund manager at SAC Capital Advisors, and to more than a dozen insider-trading cases falling apart. A key provision of the Newman decision was later rejected by the U.S. Supreme Court in a different case, however.
That made it tougher for Mr. Gupta, who had already lost a direct appeal of his conviction. He sued in 2015 arguing that the Newman ruling should be applied to free him from prison. The trial judge disagreed and the appeals court followed suit in its ruling Monday.
A federal jury in New York found Mr. Gupta guilty of passing tips to Mr. Rajaratnam about Berkshire Hathaway's $5 billion investment in Goldman Sachs and the bank's financial results for two quarters in 2008. While Mr. Gupta has already served his prison term, a ruling in his favor would have cleared the conviction from his record.
In the ruling Monday, a three-judge panel rejected Mr. Gupta's claims that he was actually innocent of the charges and disagreed that the jury was improperly instructed.
Mr. Rajaratnam, a founder of the Galleon Group, was convicted in 2011 of masterminding a multimillion-dollar insider-trading scheme and sentenced to 11 years in prison. He's due to be released in July 2021, accord to the Federal Bureau of Prisons website.