Prosecutors behind a sweeping US crackdown on market “spoofing” scored a big win on Friday when former Deutsche Bank traders Cedric Chanu and James Vorley were convicted of fraud for manipulating gold and silver prices.
A federal jury in Chicago, after three days of deliberations, concluded Mr Chanu and Mr Vorley made bogus trade orders between 2008 and 2013 to illegally influence precious metals prices. The week-long trial was the latest US prosecution of a “spoofing” case since the global market “flash crash” in 2010.
Mr Chanu and Mr Vorley engaged in a classic “bait and switch” by placing orders they never intended to execute and then cancelling them, which “weaponised” the forces of supply and demand to mislead other traders, prosecutor Brian Young told jurors in closing arguments on Tuesday.
Spoofing occurs when a trader enters buy or sell orders and then cancels them before they are executed, creating a false market indicator that can generate profit by taking the opposite position. While cancelling orders isn’t prohibited, the 2010 Dodd-Frank Act made it illegal to place orders with no intention of executing them.
Transcripts of messages the two traders sent show they knew what they were doing was wrong, Mr Young said. In one instance, Mr Vorley wrote: “This spoofing is annoying me. It’s illegal for a start”.
The star witness at the trial was their former Deutsche Bank coworker, David Liew, who told the jury he learned from Mr Chanu and Mr Vorley how to use spoof trades to manipulate prices. Mr Liew faces his own criminal charges and agreed to cooperate with the government.
Mr Chanu was convicted on seven fraud counts and Mr Vorley on three counts, while they were found not guilty of other charges, including conspiracy. Each count carries a maximum penalty of 30 years in prison, though US District Judge John Tharp said the government would seek about four or five years. Sentencing was set for January 21, and both men remain free on bail.
Mr Vorley’s attorney, Roger Burlingame, said he’ll appeal against the conviction. He called the prosecution “misguided” because his client’s trading was “well within the law”.
“It was a compromise verdict by a jury that three times declared it was deadlocked, deliberating in the face of a Covid scare,” Mr Burlingame said. The jury had been reduced to 11 after one juror complained of coronavirus-like symptoms and was dismissed. “The record is clear, there was no fraud. The compromise conviction will not stand.”
Mr Chanu’s attorney, Michael McGovern, said in an email that he was “gratified that the jury unanimously acquitted Cedric on the conspiracy and other charges, and we intend to continue the fight as to the remaining charges”.
The prosecutor declined to comment after the verdict.
Since anti-spoofing laws passed under the Dodd-Frank financial reforms a decade ago, the US has prosecuted about a dozen criminal cases, including Navinder Sarao, the British day trader linked to the 2010 “flash crash” that erased $1 trillion (Dh3.67tn) in market value.
The Commodity Futures Trading Commission also has stepped up civil complaints and reached many settlements, including a $30 million deal with Deutsche Bank in 2018. JPMorgan Chase is poised to pay close to $1 billion to resolve market manipulation investigations by US authorities into its trading of metals futures and Treasury securities, Bloomberg reported on Wednesday.
While prosecutors have secured several guilty pleas in spoofing cases – including Mr Liew, Mr Sarao and others – they’d had mixed results at trial.
In 2015, Michael Coscia was convicted in Chicago and sentenced to three years in prison. In 2018, Andre Flotron was acquitted after a federal judge in Connecticut threw out most of the charges on the grounds that the case should have been brought in Chicago, where the trading occurred. Last year, the case against Chicago programmer Jitesh Thakkar, the first non-trader prosecuted under anti-spoofing laws, ended in a mistrial and charges were dropped.
Defence lawyers for Mr Chanu and Mr Vorley didn’t present any witnesses at the trial. While questioning prosecution witnesses, they emphasised how difficult it is to determine criminal intent for “spoofing” in competitive global markets where traders keep strategies secret and try to outmanoeuvre rivals. The defence team cited several examples of legal trading practices that allow market players to hide their intentions from everyone else.
“If you fake a pass and run the ball, that’s competition, not fraud,” Mr Burlingame told the jurors during closing arguments on Tuesday. Every order placed by Vorley was “100 per cent real”, he said.
CREW
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UAE currency: the story behind the money in your pockets
Book%20Details
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Recipe: Spirulina Coconut Brothie
Ingredients
1 tbsp Spirulina powder
1 banana
1 cup unsweetened coconut milk (full fat preferable)
1 tbsp fresh turmeric or turmeric powder
½ cup fresh spinach leaves
½ cup vegan broth
2 crushed ice cubes (optional)
Method
Blend all the ingredients together on high in a high-speed blender until smooth and creamy.
UAE currency: the story behind the money in your pockets
MATCH INFO
Uefa Champions League semi-final, first leg
Barcelona v Liverpool, Wednesday, 11pm (UAE).
Second leg
Liverpool v Barcelona, Tuesday, May 7, 11pm
Games on BeIN Sports
Apple%20Mac%20through%20the%20years
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Sugary teas and iced coffees
The tax authority is yet to release a list of the taxed products, but it appears likely that sugary iced teas and cold coffees will be hit.
For instance, the non-fizzy drink AriZona Iced Tea contains 65 grams of sugar – about 16 teaspoons – per 680ml can. The average can costs about Dh6, which would rise to Dh9.
Cold coffee brands are likely to be hit too. Drinks such as Starbucks Bottled Mocha Frappuccino contain 31g of sugar in 270ml, while Nescafe Mocha in a can contains 15.6g of sugar in a 240ml can.
UAE%20medallists%20at%20Asian%20Games%202023
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Sholto Byrnes on Myanmar politics
Our legal consultant
Name: Dr Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
ELIO
Starring: Yonas Kibreab, Zoe Saldana, Brad Garrett
Directors: Madeline Sharafian, Domee Shi, Adrian Molina
Rating: 4/5
How to keep control of your emotions
If your investment decisions are being dictated by emotions such as fear, greed, hope, frustration and boredom, it is time for a rethink, Chris Beauchamp, chief market analyst at online trading platform IG, says.
Greed
Greedy investors trade beyond their means, open more positions than usual or hold on to positions too long to chase an even greater gain. “All too often, they incur a heavy loss and may even wipe out the profit already made.
Tip: Ignore the short-term hype, noise and froth and invest for the long-term plan, based on sound fundamentals.
Fear
The risk of making a loss can cloud decision-making. “This can cause you to close out a position too early, or miss out on a profit by being too afraid to open a trade,” he says.
Tip: Start with a plan, and stick to it. For added security, consider placing stops to reduce any losses and limits to lock in profits.
Hope
While all traders need hope to start trading, excessive optimism can backfire. Too many traders hold on to a losing trade because they believe that it will reverse its trend and become profitable.
Tip: Set realistic goals. Be happy with what you have earned, rather than frustrated by what you could have earned.
Frustration
Traders can get annoyed when the markets have behaved in unexpected ways and generates losses or fails to deliver anticipated gains.
Tip: Accept in advance that asset price movements are completely unpredictable and you will suffer losses at some point. These can be managed, say, by attaching stops and limits to your trades.
Boredom
Too many investors buy and sell because they want something to do. They are trading as entertainment, rather than in the hope of making money. As well as making bad decisions, the extra dealing charges eat into returns.
Tip: Open an online demo account and get your thrills without risking real money.
The President's Cake
Director: Hasan Hadi
Starring: Baneen Ahmad Nayyef, Waheed Thabet Khreibat, Sajad Mohamad Qasem
Rating: 4/5
The specs: 2018 GMC Terrain
Price, base / as tested: Dh94,600 / Dh159,700
Engine: 2.0-litre turbocharged four-cylinder
Power: 252hp @ 5,500rpm
Torque: 353Nm @ 2,500rpm
Transmission: Nine-speed automatic
Fuel consumption, combined: 7.4L / 100km
Company profile
Date started: Founded in May 2017 and operational since April 2018
Founders: co-founder and chief executive, Doaa Aref; Dr Rasha Rady, co-founder and chief operating officer.
Based: Cairo, Egypt
Sector: Health-tech
Size: 22 employees
Funding: Seed funding
Investors: Flat6labs, 500 Falcons, three angel investors
Evacuations to France hit by controversy
- Over 500 Gazans have been evacuated to France since November 2023
- Evacuations were paused after a student already in France posted anti-Semitic content and was subsequently expelled to Qatar
- The Foreign Ministry launched a review to determine how authorities failed to detect the posts before her entry
- Artists and researchers fall under a programme called Pause that began in 2017
- It has benefited more than 700 people from 44 countries, including Syria, Turkey, Iran, and Sudan
- Since the start of the Gaza war, it has also included 45 Gazan beneficiaries
- Unlike students, they are allowed to bring their families to France
More coverage from the Future Forum
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