DOJ’s attempt to stay CFTC action encounters traders’ opposition

Maria Nikolova

The requested stay, if granted, would prejudice the defendants, says Michael Nowak, who stands accused of spoofing.

Less than a month after the United States Department of Justice (DOJ) requested to intervene and stay a civil action brought by the Commodity Futures Trading Commission (CFTC) against Michael Thomas Nowak and Gregg Francis Smith, the defendants have made it clear that they oppose the DOJ’s request.

In a set of documents submitted at the Illinois Northern District Court on November 27, 2019, Nowak and Smith who stand accused of spoofing object to the DOJ’s plans.

Let’s recall that, the DOJ (i) seeks leave to intervene in the civil action; and (ii) moves for a stay of the CFTC action through the conclusion of the parallel criminal prosecution – United States v. Smith, et al., Case No. 19 CR 669 (N.D. Ill.).

In its Motion, the DOJ notes that the criminal case includes both defendants to this civil case – Michael Nowak and Gregg Smith – and substantially the same conduct, events, and time period. The government argues that the requested stay would benefit the Court and all parties by minimizing redundant litigation, narrowing the scope of discovery and issues to be adjudicated in this case, and relieving Nowak and Smith of the choice of having to choose between potentially invoking their rights against self-incrimination in this civil case (which invocation could be used against them in this case) or testifying in this case (which testimony could be used against them in the criminal case).

Further, according to the DOJ, a stay is needed to preclude Nowak and Smith from impermissibly taking advantage of the civil discovery process to circumvent the limitations on criminal discovery that protect the integrity of criminal prosecutions, and to allow the defendants the ability to focus their resources on defending the pending criminal case.

In his opposition to the DOJ’s request, Nowak notes that Courts have uniformly held that a stay is appropriate only in unique circumstances, and where necessary to avoid significant prejudice. The defendants’ use of civil discovery rules to obtain the discovery to which they are entitled does not pose a risk of cognizable prejudice or harm to the government, and does not justify the extensive stay the DOJ seeks, Nowak argues.

According to him, the requested stay, if granted, would prejudice the defendants by substantially delaying the time-consuming process of discovery in the CFTC Case, which in turn will further prolong and delay a resolution of this action.

A more limited stay, permitting document discovery to proceed but otherwise pausing the action, would better balance the competing interests of the parties and the public, according to the defendants. Such a stay would protect the criminal process as well as the defendants’ rights, but also vindicate the defendants’ interests in proceeding as expeditiously as possible to resolve the CFTC Case.

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