Federal authorities announced criminal charges on Thursday against the former chairman of Dean Foods and a high-rolling sports gambler with ties to prominent athletes and corporate executives, a surprising escalation of a long-running insider-trading investigation.
William T. Walters, often considered the most successful sports bettor in the country, was arrested by the F.B.I. in Las Vegas on Wednesday. Thomas C. Davis, the former chairman of Dean Foods who stepped down last year after being suspected of leaking insider tips to Mr. Walters, also faces charges.
In addition to criminal charges from federal prosecutors in Manhattan, the men face a civil case from the Securities and Exchange Commission.
The criminal charges carry a heightened significance for prosecutors, representing one of the most notable insider trading cases since an appellate court tossed out two prominent convictions.
After the United States Court of Appeals for the Second Circuit overturned the convictions of two hedge fund managers in December 2014 — and in the process imposed the greatest limits on prosecutors in a generation — the government warned of a chilling effect on future insider trading investigations.
Preet Bharara, the United States attorney in Manhattan, who led a sweeping crackdown on insider trading, lamented “a potential bonanza for friends and family of rich people.”
But in charging Mr. Walters and Mr. Davis with securities fraud, his office is sending a message to Wall Street and beyond that these cases can still be made. The charges could also become a test case in just how far prosecutors can go in the wake of the appellate court ruling.
A spokesman for Mr. Bharara declined to comment.
Mr. Walters’s lawyer said his client had done nothing wrong. “Bill Walters is a true American success story, whose extraordinary accomplishments as a lawful sports gambler have been widely recognized and lauded,” the lawyer, Barry Berke, said in a statement. “Mr. Walters and his counsel look forward to his day in court where it will be shown that the prosecutors’ accusations are based on erroneous assumptions, speculative theories and false finger-pointing.”
Mr. Walters’s case bridges the world of sports and finance. In the course of the investigation, federal authorities examined trades not just by Mr. Walters, but by some of his friends, including the golfer Phil Mickelson.
Mr. Mickelson, a three-time winner of the Masters golf tournament and one of the country’s highest-earning athletes, has not been accused of wrongdoing. Nor is there any indication that he will be charged.
But on at least two occasions, the F.B.I. contacted Mr. Mickelson, partly to seek his cooperation against Mr. Walters, people briefed on the investigation have previously said. Once, agents approached him on a golf course.
The scrutiny of both men—- and Mr. Davis — centered on trading in shares of Dean Foods, the nation’s largest milk processor, around the time it was planning to spin off a subsidiary, in 2012.
The authorities questioned whether the tip about the spinoff came from a board member at the company who knew Mr. Walters, who then shared the information with Mr. Mickelson, the people briefed on the investigations previously said. Mr. Mickelson, who may not have known the origins of the tip, is not suspected of wrongdoing and has not been charged.
Last August, Dean Foods announced the immediate resignation of Mr. Davis, its chairman, in a regulatory filing. Jamaison Schuler, a company spokesman, declined at the time to comment on the resignation of Mr. Davis, 67, an investment banker who had been on the Dean Foods board since 2001.
Thomas M. Melsheimer, a Dallas lawyer representing Mr. Davis, previously stated that his client “voluntarily decided to step down from the board.” He did not immediately respond to a request for comment on Thursday.
A lawyer for Mr. Mickelson did not respond to a request for comment.
Early in the investigation, federal authorities also looked at what role, if any, the billionaire investor Carl C. Icahn may have had in sharing information with Mr. Walters about the consumer products company Clorox. Mr. Icahn was mounting a takeover bid for Clorox.
But that aspect of the investigation did not bear fruit, and Mr. Icahn is not suspected of wrongdoing.
The case against Mr. Walters comes as prosecutors reassess their ability to pursue insider trading cases in the aftermath of the appeals court ruling, which overturned the case against two former hedge fund managers, Todd Newman and Anthony Chiasson.
The appellate court ruling constrained prosecutors from filing insider trading charges when tips are shared among friends, which could be the case for Mr. Walters. Specifically, the court required “proof of a meaningfully close personal relationship that generates an exchange that is objective, consequential and represents at least a potential gain of a pecuniary or similarly valuable nature.”
When the Supreme Court denied the government’s appeal, prosecutors in Manhattan voluntarily dismissed several other convictions. It started to chip away at Mr. Bharara’s insider trading track record, which was once undefeated.
Unlike many of Mr. Bharara’s past targets, Mr. Walters is not a Wall Street trader.
Over the years, Mr. Walters has been a philanthropist and well-known businessman in Las Vegas. He bought golf courses and auto dealerships. He also donated to political campaigns.
This is not the first time Mr. Walters, better known as Billy, has been the subject of a criminal investigation. In 1992, he was acquitted of illegal gambling charges. The Nevada attorney general later charged Mr. Walters with money laundering. The case resulted in three indictments, none of which resulted in a conviction.
And he may still beat the latest charges.
In a 2011 “60 Minutes” segment, the anchor, Lara Logan, remarked that “it’s hard to find anyone better at winning than Billy Walters.”