Court not to permit any further non-party filings in spoofing case against ex-Deutsche Bank traders

Maria Nikolova

The Illinois Northern District Court will accept the brief from the Futures Industry Association but no further filing by amici will be permitted.

After several financial organizations objected to the US Government approach in a lawsuit targeting ex-Deutsche Bank metals traders James Vorley and Cedric Chanu, and the Futures Industry Association (FIA) voiced its intentions to join the opponents, the Illinois Northern District Court seems to have had enough of non-parties willing to have their say in this spoofing case.

On February 15, 2019, the Court ruled that FIA will be allowed to file its brief not later than February 21, 2019. However, no further filings by amici (or would-be amici) will be permitted. Let’s explain that an “amicus curiae” is a non-party who may help the Court during the proceedings.

The list of such amici in this case has been growing. Bank Policy Institute (BPI), the Chamber of Commerce of the United States of America, and the Securities Industry and Financial Markets Association (SIFMA) are on the list. Now, FIA is joining them.

All of these “amici” are criticizing the US Government’s approach in the case against Vorley and Chanu. In this case, the government alleges that the defendants engaged in “spoofing” in the commodities futures market—i.e., entering orders that the defendants intended to cancel before those orders were executed.

According to FIA, the indictment‘s legal theory – that wire fraud liability can rest on the premise that open, executable orders for futures contracts, by themselves, can be deemed implied misrepresentations of an intention to trade – threatens the vitality of the markets. The Association insists that treating unexpressed intentions and strategies underlying executable orders as misrepresentations could create substantial legal uncertainty over the scope of trader liability not just for wire fraud but also for civil claims based on the same premise.

FIA argues that, if accepted, the Government’s theory of liability poses a serious risk of chilling legitimate, non-fraudulent trading by FIA’a members and other markets participants, many of whom engage in trading to hedge commercial and other business risks.

FIA objects to the Government’s attempt to expand the wire fraud statute in a new way that unnecessarily invites harm to legitimate trading.

BPI’s, the Chamber’s and SIFMA’s arguments are similar to those raised by FIA. According to them, instead of charging this conduct under the Commodity Exchange Act’s (CEA) prohibition on spoofing, the government claims the orders were fraudulent statements that violated the wire fraud statute.

“The government’s theory of wire fraud liability in this case is novel and expansive. It threatens to criminalize conduct that until recently has been addressed under industry- and market-specific laws, rather than amorphous allegations of wire fraud, and threatens to extend criminal liability to legitimate commercial conduct”, the business organizations have warned.

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