Ex-Deutsche Bank precious metals traders to stand trial over spoofing charges in May 2020

After James Vorley and Cedric Chanu, ex-Deutsche Bank precious metals traders accused of spoofing, failed to dismiss the charges against them, a hearing was held on November 26, 2019 at the Illinois Northern District Court to determine how the case should progress.

At the status hearing the parties agreed to a trial date of May 4, 2020. The parties also agreed to an expert disclosure schedule of 90 days before trial for the government and 45 days before trial for the defense. Without objection, time will be excluded to May 4, 2020, pursuant to 18 U.S.C. § 3161(h)(7)(A) to ensure the defendants have adequate opportunity to consider further pretrial motions, to prepare for trial due to the complexity of the case and the voluminous discovery materials, as well as to ensure continuity of counsel and the availability of counsel based on their schedules.

The Honorable Jeffrey T. Gilbert also signed an order as to James Vorley and Cedric Chanu regarding bond conditions. Appearance Bond as to each defendant is in the amount of $750,000, secured by $100,000.

The indictment alleges that, from December 2009 through November 2011, Vorley and Chanu engaged in a scheme to defraud other traders on the Commodity Exchange Inc. (COMEX) that involved interstate wire communications.

COMEX used an electronic trading system called “Globex,” which allowed traders to trade futures contracts from anywhere in the world. During the relevant period, Vorley worked in London; Chanu worked first in London and later Singapore. The Globex servers, however, were located in Chicago and Aurora, Illinois, and that was the basis for venue in the Northern District of Illinois.

The indictment alleges that the duo sought “to deceive other traders by creating and communicating materially false and misleading information regarding supply or demand, in order to induce other traders into trading precious metals futures contracts at prices, quantities, and times at which they would not have otherwise traded, in order to make money and avoid losses for the coconspirators.”

Vorley and Chanu would place one or more orders for precious metals futures contracts on one side of the market (bid or offer), intending to cancel the orders before they could be accepted by other traders. The indictment refers to such orders as “Fraudulent Orders” because the defendants did not intend to execute them; instead, these orders were “intended. . . to deceive other traders” about the true supply or demand for the commodity in question. The indictment alleges that the Spoofing Orders “were material misrepresentations” regarding the defendants’ intent to trade those orders.

Contemporaneously with placing the Spoofing Orders, the defendants placed what are referred to as “Primary Orders” on the opposite side of the market. Unlike the Spoofing Orders, the defendants intended to execute the Primary Orders, which involved trades that were of smaller volume.

Vorley and Chanu allegedly profited from the scheme because the Spoofing Orders would deceive other traders about supply and demand, misleading them about the likely direction of the commodity’s price and making the defendants’ Primary Orders, on the other side of the market, look attractive.