Ex-Deutsche Bank traders accused of spoofing oppose admission of co-conspirator statements at trial

Maria Nikolova

The proffered evidence fails to demonstrate that the alleged conspiracy existed or that the alleged co-conspirators were parties to any agreement to commit fraud, according to James Vorley and Cedric Chanu.

Former Deutsche Bank precious metals traders James Vorley and Cedric Chanu, who stand accused of spoofing, have replied to a motion by the United States Government regarding admission of co- conspirator statements at trial.

The motion was submitted by the US Government in March 2020. The government’s proffer strives to include a comprehensive list of the co-conspirator statements that it plans to introduce as part of its case-in-chief, as well as some statements necessary to put the conspiratorial declarations in context.

There are two categories of statements that the government plans to introduce: (1) statements in electronic communications between and among the defendants and their co-conspirators; and (2) verbal communications among the defendants and their co-conspirators introduced through a cooperating witness, David Liew, who was a member of the charged conspiracy.

On July 31, 2020, James Vorley and Cedric Chanu submitted their opposition to the Government’s Motion for Preliminary Admission of Co-Conspirator Statements.

According to the defendants, the proffer falls short of demonstrating the existence of a criminal conspiracy. They insist that the Government ignores a key disputed issue in this case: whether the charged conduct involved an implied fraudulent misrepresentation.

In order to show the defendants and their alleged co-conspirators were engaged in a conspiracy to defraud other market participants, the government must present evidence that those orders conveyed a material misrepresentation to other market participants about their intent.

The proffered evidence, the defendants say, fails to demonstrate that the alleged conspiracy existed or that the alleged co-conspirators were parties to any agreement to commit fraud. The government repeatedly asserts that the various traders on the precious metals desk engaged in “deceptive trading,” as if this demonstrates that they had an agreement to or knew that they were engaging in fraud. But evidence that employees on Deutsche Bank’s precious metals desk discussed or engaged in “deceptive trading” does not remotely establish that they conspired to misrepresent anything to other traders, Vorley and Chanu say.

“The false equivalence of “deceptive trading” with fraud ignores the fact that trading is a competitive enterprise in which traders must actively conceal their strategies in order to be successful”, the defendants argue.

Vorley and Chanu explain that an “iceberg order,” which reveals only part of the amount a trader intends to buy or sell, is deceptive in that it hides, and thereby expressly misrepresents, true available supply or demand. Likewise, traders may “shred” large orders into a series of smaller orders to be executed over time in order to disguise the true size of the order. Yet such “deceptive trading” is widely accepted as perfectly lawful, the defendants say.

Vorley and Chanu insist that even the government’s cooperating witness, David Liew, who has pleaded guilty, will testify that entering visible orders opposite iceberg orders—the trading he now describes as “spoofing”—was described to him as a legitimate technique to gather market information or to clear risk, and he did not believe at the time that he was involved in market manipulation, fraud, or any other criminal activity.

Further, the defendants argue that the various statements the government seeks to admit into evidence appear to have been selected based on search terms such as “spoof” and “manipulate.” They are presented without context (or even time stamps), and they are replete with unexplained, imperceptible jargon and ambiguity, Vorley and Chanu say.

“With respect to the majority of the statements, the government has not even bothered to state what they are supposed to mean, much less how they advanced the objectives of the alleged conspiracy”, the defendants add.

The government’s motion to admit the proffered statements preliminarily under Rule 801(d)(2)(E) should therefore be denied, Vorley and Chanu say.

The lawsuit continues at the Illinois Northern District Court.

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