US v. Jitesh Thakkar: An Exercise in Justice

Thom Thompson

Thom Thompson

Contributing Editor

April 1, 2019 was the first day in the criminal trial U.S. v Thakkar, in which the government charges that Jitesh Thakkar aided and abetted spoofing in a manipulative and deceptive scheme carried out by another person. It is a serious allegation and everyone is taking it seriously. There are four prosecuting and three defending attorneys. If things run as scheduled, yesterday was just the first of a half-dozen or so days of testimony and arguments as the Federal Government endeavors to right the wrongs allegedly perpetrated by Jitesh Thakkar, president of Edge Financial Technologies, a software development firm that programs applications for the trading industry.

Much of the day was taken up with the testimony by Navinder Sarao, whose trading activities lie at the heart of the case against Thakkar. As was evinced in Sarao’s testimony during cross-examination, Thakkar did not take part in any of the trading nor did he profit from it.  Thakkar, the person on trial, made $24,200 for his alleged efforts in aiding and abetting the manipulation of a U.S. futures market that garnered Sarao about $13 million in illicit gains. Sarao, who is now on public assistance, has already forfeited the $13 million and more.

Starting back in 2011, Sarao, a proprietary trader based in London who traded electronically on several futures exchanges, searched for a software programmer who would help him configure his trading platform in certain ways. Sarao testified that he had been engaging in what was called spoofing and was looking to improve the software he used for trading so it would execute his “back of book” strategies more reliably. He had engaged programmers before but had been dissatisfied with their work. Thakkar, along with two other programmers, responded to Sarao’s request for proposals in October 2011 and was engaged shortly thereafter.

Sarao specified the requirements for Thakkar, avoiding the term “spoof,” which had become toxic by then.  Sarao testified yesterday that he had used the term earlier with other third parties when he was outlining his strategy. The 2010 Dodd-Frank Act specifically forbids spoofing and Sarao said he wanted to use the new programs to trade the CME’s E-mini S&P futures.  

As part of a plea deal with the U.S. government in which he pleaded guilty to two criminal charges, Sarao has promised to assist in the prosecution of Thakkar. Sarao was examined for several hours by the prosecutor, and you had to remind yourself every so often that Sarao himself is not on trial. The testimony consisted of the prosecutor asking a number of different versions of the same question to establish the fact record for the trial. When it was finished, the court had a very clear idea of what the software did and why Sarao had asked for it to be made that way.

Sarao was calm throughout the prosecution’s questioning, for which, as the lead attorney for the defense Renato Mariotti established during cross-examination, he was very well prepared. Sarao did not shrink under Mariotti’s questioning, which established that Thakkar had no relationship with Sarao other than providing the software Sarao used. Mariotti also persuaded Sarao to say the “spoofing” function that Thakkar had provided had to be turned on for it to work and that other components of the software Thakkar provided could not be used for illegal trading activity. Mariotti pointed out that Sarao told the FBI in January 2018 that the “back of book” functionality could be used for both legitimate and illegitimate trading, a point that Sarao would not confirm under cross-examination. (Sarao and Thakkar are not friends or otherwise associated; there does not seem to be any advantage to Sarao for Thakkar to be found guilty.)

Judge Gettlemen’s courtroom on the 17th floor of the Dirksen Federal Building makes a solid impression, comporting with the government’s wishes to convey power and seriousness of purpose. It is high-ceilinged and panelled in medium-hued wood. A possible false note in the architecture of the space is that the judge appears remote from the proceedings. The total effect is a very American mix of pomp, accessibility (for example, there is no barrier between the gallery and the rest of the courtroom), informality, gravity and power.

Thakkar, without a necktie (informality), sits at the defense table in this slightly stuffy courtroom with his three attorneys. It feels appropriate until you wonder what point our government could possibly be trying to make in bringing all of this (courtroom, four prosecutors, six-day trial) down on a software programmer who made $24,200 once upon a time for alleged efforts that netted someone else – who, in the meantime, has been caught and is being punished – $13 million. What could be the punishment that fits Thakkar’s crime, if the jury finds that there was one?

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