By Brendan Pierson

By Brendan Pierson

NEW YORK (Reuters) - A federal appeals court on Tuesday rejected a bid by famed Las Vegas sports gambler William "Billy" Walters on Tuesday to remain free while he appeals his conviction and five-year prison sentence for insider trading.

The U.S. Court of Appeals for the 2nd Circuit in Manhattan denied Walters' motion to remain free on bail during his appeal only hours after hearing arguments. Walters has been ordered by U.S. District Judge Kevin Castel to surrender on Oct. 10.

His attorney, Alexandra Shapiro, could not immediately be reached for comment. Shapiro had argued Tuesday morning that U.S. prosecutors engaged in a "concerted, extensive and illegal campaign" of leaks to the news media in Walters' case.


She also said evidence showed the government's star witness, former Dean Foods Co Chairman Tom Davis, lied on the stand when he told jurors he fed Walters tips about the company using a prepaid "burner" cellphone dubbed the "Batphone."

Shapiro said those "substantial issues" meant Walters should be allowed to remain free during his appeal.

Walters was accused of making more than $43 million in profits and avoided losses from 2008 to 2014, mostly from stock tips from Davis about Dean Foods. Walters was convicted in April of securities fraud, wire fraud and conspiracy following a four-week trial.

Assistant U.S. Attorney Brooke Cucinella, arguing for the prosecution on Tuesday morning, noted that Castel had already considered both of the issues raised by Shapiro.

Prosecutors admitted before Walters' trial earlier this year that FBI agent David Chaves leaked information about a grand jury investigation of Walters to news media. The leaks have prompted a criminal investigation by the Justice Department’s Office of the Inspector General.

Walters' attorneys argued that the leaks were meant to revive a dormant investigation that would otherwise never have resulted in criminal charges. Shapiro argued on Tuesday that news reports about the investigation put pressure on Davis to testify for the prosecution and fabricate a story about tipping Walters.

Castel ruled before the trial that the leaks were not grounds for dismissing the charges.

The case has drawn attention because of prosecutors' claim that Walters passed an insider tip about Dean Foods to champion golfer Phil Mickelson. The golfer was not charged with a crime but did agree to surrender money he made trading in the company's stock to U.S. securities regulators.

(Reporting by Brendan Pierson in New York; Editing by Paul Simao and Jonathan Oatis)