Justice Department Charges Eight Individuals with “Deceptive Trading Practices” on Commodities Markets

On Monday, January 29, 2018, the Justice Department announced charges against eight individuals accused of manipulating U.S. commodities markets for financial gain. Seven of the eight individuals were charged with spoofing. Spoofing refers to a fraud tactic that involves the placing of hundreds to thousands of “spoof orders” – orders that the spoofer does not intend to trade – in order to incentive market participants to buy, sell, or trade at manipulated prices. In doing so, spoofing fools market participants to make their investment decisions based on a false perception of supply and demand.

The individuals charged are James Vorley, 37, of the United Kingdom; Cedric Chanu, 39, a French citizen; Edward Bases, 55, of New Canaan, Connecticut; John Pacilio, 53, of Southport, Connecticut; Jitesh Thakkar, 41, of Naperville, Illinois; Jiongsheng (“Jim”) Zhao, 30, of Australia; Andre Flotron, 53, a Swiss national residing in Wayne, New Jersey; and Krishna Mohan, 33, of New York, New York. Vorley, Chanu, Bases, Pacilio, Thakkar, and Jiongsheng were charged in the Northern District of Illinois, Flotron was charged in the District of Connecticut, and Mohan was charged in the Southern District of Texas. The spoofers primarily targeted the precious metals and E-mini futures contracts markets.

The charges constitute the largest futures market criminal enforcement action in the Justice Department’s history.

In prepared remarks delivered on Monday, Acting Assistant Attorney General John P. Cronan highlighted the assortment of methods used to identify market manipulation and gather evidence in the cases. In addition “traditional law enforcement techniques” and cooperation with the private sector, authorities used data analysis methods to “identify spoofing patterns through sophisticated analysis of market-level data.” Cronan noted that, in the future, the Department expects to make even greater use of data analysis to identify and counter spoofing.

For more coverage and analysis of this enforcement action, see the February 2018 issue of the International Enforcement Law Reporter.