Two More Spoofers Convicted
Posted by Colin Lambert. Last updated: August 6, 2021
Just over a month after two commodities traders were jailed for spoofing offences, another US court has found two other precious metals traders guilty of the same offence.
Convicted under the broad US wire fraud laws, Edward Bases and John Pacilio, both of whom formerly worked at Deutsche Bank and Bank of America Merrill Lynch, were found guilty by a Illinois court. The offences spanned their time at both Deutsche Bank – where Cedric Chanu and James Vorley, the two traders convicted in late June worked – and BAML. Chanu and Vorley were sentenced to one year and one day in prison.
During the trial the defendants argued that as the offences took place before the enactment of Dodd-Frank, which explicitly outlawed spoofing, the case should be dismissed – there was also a defence offered that the men were taught how to do it by senior traders (both were in their 40s when the offences took place).
In the end, as seems to happen a lot in these types of cases, the defence was undone by chat logs, in which the dealers openly discussed their ability to manipulate the markets. The US Department of Justice (DoJ), in a statement, highlights two such episodes, with Bases writing “that does show you how easy it is to manipulate it sometimes…I know how to ‘game’ this stuff” and messages from Pacilio stating, “I just put in 500 lots to spoof the gold,” and “if you spoof this it really moves.”
The DoJ also says as a result of the scheme, other market participants, some of whom testified at trial, were induced to trade at prices, quantities, and times that they otherwise would not have traded. It adds that Bases and Pacilio engaged in this conduct despite having received and been trained on bank policies prohibiting fraud and deceptive trading practices.
“These defendants undermined public confidence in US commodities markets by manipulating prices to create the false appearance of supply and demand,” says assistant attorney general Kenneth Polite Jr. of the DoJ’s Criminal Division. “This verdict shows that the Department of Justice is committed to holding accountable those who line their pockets by manipulating our financial markets through fraud.”