CFTC v Thakkar: a fishing license

Jitesh Thakkar, the Chicago computer programmer charged with aiding and abetting a market manipulation by supplying software, was back in court on Wednesday. Thakkar’s attorney, Renato Mariotti, presented his motion for summary judgment at least to forestall lengthy discovery by the CFTC. The CFTC with its considerably greater resources is playing the long game, seemingly hoping to impoverish the defendant into a guilty settlement plea before the agency loses the same case the Department of Justice already abandoned as unwinnable in July. 

Judge Andrea Wood asked the CFTC’s attorney what discovery the CFTC needed in order to respond to the defendant’s motion. The CFTC complained that it had not yet been provided access to Thakkar’s trading records (!). The CFTC also said it would also like to depose the other members of the CFTC’s Technology Advisory Committee’s Subcommittee on Automated and High Frequency Trading to help it determine how much Thakkar knew about spoofing. The Subcommittee (whose members, including Thakkar, are listed below) was established in March 2012. 

Mariotti responded that Thakkar was not a trader and Thakkar himself spoke up to confirm that he had once had a test account where he traded one-lots. Mariotti also doubted the usefulness of speaking to the subcommittee members. 

Judge Wood seemed to think that the CFTC’s first two requests were not compelling. The judge noted the enormous amount of material that had been gathered already in the previous trial. 

Judge Wood said the CFTC’s approach was a little like a fishing expedition. But she said the CFTC should be allowed to conduct discovery. 

The CFTC also complained that it wants to interview the witnesses from the earlier federal investigation and trial, despite the availability of transcripts and recordings. The CFTC seems to have had problems getting the documents from the U.S. Department of Justice, including transcripts of the interviews the FBI conducted with Thakkar and others. Mariotti told the judge that he had already provided the plaintiff everything he was permitted legally to provide.    

Despite acknowledging that Thakkar had already been put through a lot, Judge Wood dismissed the motion for summary judgment without prejudice. Making it sound like an order, she told Mariotti that he can resubmit the motion once the document discovery has been completed. She also shortened the discovery schedule that had been submitted by the CFTC and approved last week. 

The court seems to have found some sympathy for the plight of Jitesh Thakkar. The CFTC will have to wade through all the documents and prior evidence to establish the need for additional testimony and other discovery in the case. This exercise might convince the agency to drop the charges as it looks for what the FBI and the Justice Department did not find: evidence that Thakkar knowingly aided and abetted market manipulation. 

Members of the CFTC Technology Advisory Committee’s  Subcommittee on Automated and High Frequency Trading in March 2012   

The CFTC named the following as members: 

Irene Aldridge of ABLE Alpha Trading, Ltd.

Peter Buckley of Newedge USA, LLC

Sean Castette of GETCO

Colin Clark of NYSE Euronext

Christopher Concannon of Virtu Financial, LLC

Edward Dasso of the National Futures Association

Keith Fishe of TradeForecaster Global Markets, LLC

Joel Hasbrouck of the New York University Stern School of Business

Robert Hegarty of Thomson Reuters

Terrence Hendershott of University of California Berkeley

Chris Isaacson of BATS Global Markets, Inc.

Paul Kepes of Chicago Trading Company

Jordan Lea of the American Cotton Shippers Association

Chris Lorenzen of Eagle Seven Holdings, LP

Michael Mendelson of AQR Capital Management

Jim Northey of FIX Protocol Ltd.

Dean Payton of CME Group

Peter Reiss of DE Shaw & Company

Joseph Saluzzi of Themis Trading, LLC

Tim Sargent of Markit

Larry Tabb of Tabb Group

Jitesh Thakkar of Edge Financial Technologies

Mark Wassersug of Intercontinental Exchange, Inc. (ICE)

Gregg Wood of Credit Suisse Securities (USA), LLC.