Investigating Spoofing

Another Prison Sentence for Spoofing In The United States

A former commodities trader at Deutsche Bank was sentenced Monday to 12 months and a day in prison for a scheme to commit wire fraud affecting a financial institution.

Cedric Chanu, who was employed as a precious metals trader at Deutsche Bank in Singapore and, later in London, engaged in a scheme to defraud other traders on the Commodity Exchange.

Together with James Vorley and other Deutsche Bank traders, the defendant defrauded other market participants through a deceptive trading practice known as “spoofing.”

Chanu placed fraudulent orders that he did not intend to execute in order to create the false appearance of supply and demand and to induce other traders to transact at prices, quantities, and times that they otherwise would not have traded.

James Vorley, who worked in London for Deutsche Bank from 2007 to 2015, was sentenced on June 21, also to 12 months and a day in prison. The Criminal Division’s Fraud Section argued for a sentence of four years and nine months.

“Everyone who works in the financial markets has to be reminded and understand that attempts to manipulate the market by any means will expose them to substantial criminal sanctions”, said U.S. District Judge John Tharp when sentencing James Vorley.

The defense advocated for supervised release as the spoofing occurred before the Dodd-Frank Act’s anti-spoofing provision came into effect in mid-2011.

In 2018, Deutsche Bank paid $30 million to settle with the U.S. Commodity Futures Trading Commission over alleged spoofing. The bank neither admitted nor denied the allegations.

Spoofing now seems to merit prison time for the DoJ. Cedric Chanu was the third to be sentenced to prison for spoofing, which could influence upcoming trials.

Two former Merrill Lynch traders are scheduled to go to trial in July for similar charges, followed by three individuals accused of spoofing at JPMorgan Chase in October.