CFTC Dismisses Its Case Against Jitesh Thakkar, Settles With Edge Financial

Thom Thompson

Thom Thompson

Editor

The CFTC is dropping all charges against Jitesh Thakkar in the anti-spoofing case that grew out of software development work that Thakkar’s company, Edge Financial Technology, performed in 2012 for Navinder Sarao. Sarao made at least $12.8 million by illegal spoofing, making him the most prominent trader to have been charged by the U.S. government for the crime. 

The proposed consent order was filed with the U.S. Federal District Court for Northern Illinois on Thursday. The court still needs to approve the settlement.  

The CFTC had not announced the settlement or provided any additional information on its website by this weekend. 

A petition, “Justice for Jitesh,” asking that all charges be dropped against Jitesh Thakkar, was launched last year by John Lothian, publisher of this newsletter. The petition on Change.org garnered more than 2,500 signatures from newsletter subscribers, traders, programmers and the public. 

The U.S. Justice Department dropped its criminal charges against Thakkar and Edge last year after a week-long jury trial in Chicago. The jury could not agree to convict Thakkar, splitting 10-2 in favor of “not-guilty.” The 2019 trial, which included lengthy examination and cross examination of Sarao, featured testimony from numerous experts as well as from the FBI. In light of the evidence given at trial, the Justice Department decided to drop all charges against Thakkar and Edge. 

Relying substantially on the same evidence as the Justice Department’s, the CFTC filed civil charges against Thakkar and Edge at the same time. Although testimony and other evidence provided during the criminal trial would not likely have been sufficient to support prosecution on civil charges, the CFTC’s Division of Enforcement proceeded against Thakkar last summer. 

CFTC attorneys asked the court for the opportunity to make their own case, telling 

Federal Judge Andrea Wood that the standard of proof for a civil case was different than for a criminal case. She allowed the case to proceed, appearing to become increasingly skeptical of the government’s efforts as the case moved forward.

CFTC attorneys deposed the former employees of Edge who had worked on the project for Sarao in 2012-13, in one case travelling to Toronto and hiring a translator for the deposition of the foreign-born programmer. In January, shortly before the end of the period granted by the court for discovery, attorneys told the court that they had agreed to settle the case. Division attorneys asked to depose 2012 members of the CFTC’s own Technology Advisory Committee, one of whose subcommittees included Thakkar, about statements he may have made to them regarding spoofing.

This quietly filed settlement agreement, the details of which have been impatiently awaited by the Chicago trading community, does not include any “gag order” unlike the agreement between the CFTC and Kraft from almost exactly a year ago. which famously did seem to require the commission to be circumspect about the results, was immediately published by the CFTC accompanied by several additional press releases.

The CFTC did prevail against Edge Financial Technology, the software development company. Edge, which no longer operates, agreed to disgorge the $24,000 in fees it earned from the work for Sarao and to pay twice as much again in fines. Among other things, Edge agreed not to sell the 2012 “Back-of-the-Book” program to anyone or include it in future projects. According to statements by Thakkar during the criminal trial, Edge never again sold the program, the design of which was specified by Sarao, to any additional parties.

The settlement with Edge does provide the CFTC with a victory in its controversial claim of jurisdiction over a non-registrant who is also not a customer. 

Final settlement of the 2011 wheat market manipulation case brought by the CFTC against Kraft is pending. 

  

 

 

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