US Govt seeks to intervene in spoofing case against precious metals futures traders

The United States Department of Justice is seeking to intervene in a civil action brought by the Commodity Futures Trading Commission against two traders allegedly involved in market manipulation. In a filing with the Illinois Northern District Court, the DOJ moved for an initial two-month stay of the civil action in light of the parallel criminal prosecution.

Both the civil case and the criminal case involve the same defendants—James Vorley and Cedric Chanu—and generally involve the same types of conduct, events, and time period, the Government says. Both cases allege that defendants Vorley and Chanu engaged in a form of fraud and manipulation known as “spoofing” (the unlawful practice of bidding or offering with the intent, at the time the bid or offer was placed, to cancel the bid or offer before it is executed) in the markets for precious metals futures contracts.

According to the CFTC complaint, the unlawful conduct lasted from around May 2008 through at least in or around July 2013. The criminal complaint alleges that the defendants’ scheme continued until in or around March 2015.

According to the DOJ, a stay of the civil case would preclude Vorley and Chanu from using 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 against the pending criminal case.

The Government argues that the requested stay would benefit the Court and the parties in the case by minimizing redundant litigation and narrowing the scope of discovery. In addition, such a stay is seen to relieve defendants Vorley and Chanu of having to choose between potentially invoking their rights against self-incrimination in this case (which could be used against them in the civil case) or testifying in the case (which could be used against them in the criminal case).

Motions by the US Government to intervene in civil actions while a parallel criminal action is ongoing are not rare. For instance, in March this year, Judge Lorna G. Schofield of the New York Southern Distruct Court granted the DOJ application for a three-month extension of the limited discovery stay in a Forex benchmark rates fixing case captioned Nypl v. JP Morgan Chase & Co. et al (1:15-cv-09300). In particular, the DOJ had requested that depositions and interviews of current and former employees of seven defendant banks – Citibank, JPMorgan Chase, Barclays, RBS, UBS, BNP Paribas, and HSBC – are stayed. Individuals who worked for any of the above-referenced seven banks only prior to the beginning of the class period (December 2007) still may be deposed.