Ex-Deutsche Bank Traders Charged in Expanding Spoofing Probe
(Bloomberg) -- Two former Deutsche Bank AG employees were charged with fraudulent and manipulative trading involving precious metals futures contracts through a practice known as spoofing as a federal probe on illegal market practices continues to widen.
James Vorley, 38, of the U.K., and Cedric Chanu, 39, of France and the United Arab Emirates, were indicted Tuesday for conspiracy and wire fraud by a grand jury in Chicago. The two are accused of engaging in a multiyear scheme to defraud other traders on the Commodity Exchange Inc., a venue run by the Chicago Mercantile Exchange Group.
Prosecutors said they worked with another Deutsche Bank trader, David Liew, to place fraudulent orders that they didn’t intend to execute to create a false sense of supply and demand and induce other traders to enter into transactions they wouldn’t have otherwise made.
Roger A. Burlingame, Vorley’s lawyer, said the charges are based on a "misguided interpretation of manual trade data."
"Mr. Vorley’s trades were perfectly legal, were reviewed by supervisors, compliance and external regulators, and fell squarely within accepted market practice," Burlingame said in an email. "He will voluntarily travel from his home in London to Chicago to fight the case, and we expect him to be completely vindicated."
No attorney was listed for Chanu in court records. Attorneys who represented Chanu in a Commodity Futures Trading Commission lawsuit didn’t immediately respond to a request for comment.
Liew, who pleaded guilty to conspiring to manipulate futures contracts in precious metals in June 2017, has become a government witness for U.S. prosecutors probing whether traders at the world’s biggest banks conspired to manipulate prices in silver, gold, platinum and palladium.
Deutsche Bank, which wasn’t accused of wrongdoing in the cases against Liew, is one of nearly a dozen banks whose metals trading came under Justice Department scrutiny in early 2015. Investors have brought lawsuits against a handful of big banks, including Deutsche Bank, alleging manipulation of precious metals markets.
Deutsche Bank, HSBC Holdings Plc and UBS Group AG agreed in January to pay about $50 million to settle civil claims that they manipulated metals markets, and eight individuals, including Vorley and Chanu, were named.
Spoofing involves generating a flood of fake orders to fool other traders into thinking the market is poised to rise or fall. While there’s nothing wrong with canceling orders, the Dodd-Frank Act passed in 2010 makes it illegal to place orders with no intention of executing them. People familiar with the matter told Bloomberg News in January that the U.S. is also looking beyond precious-metals trading and planning more criminal spoofing charges against Wall Street traders.
A former UBS Group AG precious metals trader, Andre Flotron, was found not guilty in April by a federal grand jury in Connecticut of scheming to manipulate futures markets, in the first acquittal in a spoofing-related case since the U.S. outlawed the practice.
The case is U.S. V James Vorley, 18-cr-00035, U.S. District Court, Northern District of Illinois (Chicago)
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