Bank Policy Institute criticizes US Govt approach in lawsuit against ex-Deutsche Bank traders

The approach of the United States government in a case targeting former Deutsche Bank AG metals traders James Vorley and Cedric Chanu has come under fire.

On Wednesday, January 23, 2019, Bank Policy Institute (BPI) filed a motion with the Illinois Northern District Court asking for permission to submit a brief amicus curiae in support of the defendants’ motion to dismiss the indictment. An amicus curiae is someone who is not a party to a case and is not solicited by a party, but who assists a court by offering information that bears on the case.

BPI is a nonpartisan public policy, research, and advocacy group, representing many of the US banks and their customers.

Let’s recall that the Indictment alleges that Vorley and Chanu engaged in “spoofing” in the commodities futures market – entering orders on electronic futures exchanges that the defendants intended to cancel before they were executed.

BPI argues that, given that spoofing is already a crime under the CEA, and requires that the government prove certain elements so as to avoid inadvertently reaching legitimate forms of trading, the government’s attempt to fall back on allegations of generalized violations of the wire fraud statute to charge alleged spoofing is misguided. According to BPI, the government should not be permitted to expand the scope of the generally-applicable wire fraud statute and skirt the specific anti-spoofing provisions in the CEA that reflect the specialized statutes and rules crafted by Congress and the CFTC for the futures market.

BPI argues that the government’s theory of prosecution poses at least two clear risks to the interests of BPI’s members.

First, if the government’s theory is ratified by the Court, any offer to enter into a transaction that makes only accurate factual representations and that would result in a binding contract if accepted, could be a crime. This may happen if the party making the offer hoped it would not be accepted and planned to withdraw it in the future before a transaction occurred. Sophisticated parties, in dealing with one another, regularly have occasion to make representations or take positions that may not reflect their hoped-for or ideal outcome, but which nevertheless would form the basis of a deal if accepted against the unexpressed hopes of the offeror, the organization explains.

Second, according to BPI, the government’s theory would allow the government retroactively to charge violations of yet-to-be-articulated rules of conduct as criminal fraud. Conduct related to negotiations completed a decade ago could be unearthed and subject to the new, broader view of criminal conduct reflected in the indictment.

BPI requests that it be permitted to file its brief no later than February 6, 2019.