CFTC warns that traders accused of spoofing are trying to obtain excessive evidence

Maria Nikolova

According to the CFTC, James Vorley and Cedric Chanu attempt to seek discovery from the regulator without limitation, while trying to shield themselves from their obligations to provide discovery.

The latest request by the US Government to stay the civil action against James Vorley and Cedric Chanu, accused of spoofing, has resulted in disagreement between the traders and the Commodity Futures Trading Commission (CFTC). Whereas the defendants have asked for a narrower stay, the CFTC opposes their request.

On Monday, August 13, 2018, the US regulator submitted a document outlining its opposition to James Vorley and Cedric Chanu’s suggestion.

The CFTC does not oppose the Government’s third request to stay this civil proceeding during the pendency of the criminal case against the former traders, which is pending before the Honorable John J. Tharp, Jr. (No. 1:18-cr-00035). The regulator notes that although it would like to proceed expeditiously, it will not be prejudiced by a brief stay pending the conclusion of the criminal proceeding.

However, the CFTC opposes Defendants’ request for a one-sided, “narrower” stay that would permit them to obtain discovery while shielding them from having to provide discovery themselves. According to the regulator, the Court should reject the defendants’ unreasonable and unfair proposal.

The CFTC alleges that beginning in at least May 2008 through at least July 2013, Vorley and Chanu repeatedly engaged in manipulative or deceptive acts and practices by spoofing – bidding or offering with the intent to cancel the bid or offer before execution – while placing orders and trading in the precious metals markets.

On numerous occasions, Vorley and Chanu placed orders for COMEX gold, silver, platinum or palladium futures contracts that they wanted to get filled, and entered orders for the same contract on the opposite side of the market that they intended to cancel before execution (“spoof orders”). In placing these spoof orders, the defendants are alleged to have intentionally or recklessly sent false signals of increased supply or demand to trick market participants into executing against orders the defendants wanted to get filled.

Vorley and Chanu propose a “narrower” stay which would allow discovery to go forward with the exception of deferring depositions of parties and witnesses who intend to assert their Fifth Amendment rights against self-incrimination. The CFTC argues that the Court should reject this proposal, which would allow the defendants to seek discovery from the regulator without limitation, but will shield the defendants from their obligations to provide discovery.

According to the CFTC, the strong inference from the proposal of Vorley and Chanu is that they would assert their Fifth Amendment privilege against self-incrimination and thus be shielded from testifying in depositions, while remaining free to obtain wide-ranging discovery, including deposition testimony, from the CFTC and third parties. The defendants would thus be spared from either answering questions in a deposition or from having to assert their Fifth Amendment privilege in response to specific deposition questions, and thus escape being subject to the consequent adverse inferences against them that they would be subject to in the course of ordinary discovery.

The regulator says that the defendants’ request is “a blatant attempt to obtain extensive discovery to assist in their defense in the criminal proceeding, without providing equal discovery to the CFTC (and simultaneously gaining an advantage over the CFTC in preparing for trial)”.

The previous requests for staying this civil action had not led to any disagreements.

The case, captioned Commodity Futures Trading Commission v. Vorley et al (1:18-cv-00603), continues at the Illinois Northern District Court.

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