Federal prosecutors in New York filed a petition Friday seeking a rehearing in the case of two men whose insider-trading convictions were overturned by a federal appeals panel that said the men were too far removed from the inside information to be prosecuted.

U.S. Attorney Preet Bharara filed the petition late Friday asking the 2nd U.S. Circuit Court of Appeals to reconsider its Dec. 10 decision to overturn the convictions of Anthony Chiasson and Todd Newman, saying that the ruling "threatens the effective enforcement of the securities laws."

Chiasson co-founded Greenwich, Connecticut-based Level Global Investors. He was sentenced to 6 1/2 years in prison and ordered to pay a $5 million fine and forfeit $1.38 million.

Newman worked for Stamford, Connecticut-based Diamondback Capital Management. He received 4 1/2 years, was fined $1 million and ordered to forfeit $737,724.

The former portfolio managers were both convicted in December 2012.

The three-judge panel of the appeals court said the government failed to prove that the men willfully engaged in insider trading or conspired to break the law.

The prosecutors said in their petition that if the opinion stands it will "dramatically limit the government's ability to prosecute some of the most common, culpable, and market-threatening forms of insider trading."

They want the case to be reheard by the three-judge panel and by the entire 2nd Circuit.

Gregory Morvillo, a lawyer for Chiasson, said the Dec. 10 decision "unequivocally confirmed" Chiasson's innocence.

"Mr. Chiasson has the utmost faith in the criminal justice system, which affords the government the opportunity to seek this review," Morvillo said. "We respectfully await the full Circuit's response."

Stephen Fishbein, a lawyer for Newman, said he had no comment.