New Jersey-based high-speed commodities trader Michael Coscia has been found guilty of six charges of spoofing and six of commodities fraud in a case brought by the Commodities and Futures Trading Commission. The jury took less than an hour to convict him.
Coscia manipulated the market by placing huge orders which he never intended to execute. They were then subsequently canceled – often within milliseconds. At the same time he would place smaller orders on the other side of the market, the large orders moving the market in his favor.
Orders Placed In 2011
The prosecution concentrated on six orders placed in 2011 in the soybean meal, soybean oil, copper futures, euro, British pound, and gold markets which netted Coscia $1,070 it was alleged. He placed thousands of similar trades and made $1.4 million over a period of three months.
A computer programmer, Jeremiah Park, who worked for Coscia’s firm, Panther Energy, testified that he created algorithms which were designed to “pump up the market”.
Defense attorney, Steven Peikin, argued that high-speed traders often canceled orders. While, Coscia’s method was unique, it was not illegal. He said after the verdict that he was disappointed, and that the case contained complex issues. His client intended “to pursue all of his legal options.”
$2.8 Million Fine And Trading Ban
The jury was not told that in 2013 Coscia had paid civil claims by the CTFC to the tune of a $2.8 million fine and accepted a trading ban for a year.
This is the first guilty verdict under the new law, and the trial was keenly watched by lawyers and traders.
Michael Friedman of Trillium Trading said that there will now be more cases of a similar nature. He commented that the CTFC had a new tool in its toolbox that it wasn’t certain worked, but it now knows that it does. There is a further case pending involving a Chicago-based trader, Igor Oystacher and his company 3Red Trading LLC.
In addition, federal prosecutors in Chicago are seeking the extradition of a UK based trader, Navinder Singh Sarao, who is accused of charges relating to the “flash crash” of May 2010 which wiped out nearly $1 trillion of US equities temporarily.
Coscia grew up in Brooklyn, and first became interested in the markets when his father placed a $2 bet on a horse race, turning it into a $55,000 winner which was subsequently invested in the markets.
Coscia is due to be sentenced on March 17th next year and faces a maximum sentence of 10 years and $1 million dollar fine on each of the spoofing counts, together with a maximum of 25 years and $250,000 on each of the fraud charges.