When I started writing about the CFTC’s civil enforcement case against Jitesh Thakkar and Edge Financial Technologies, I asked for Justice for Jitesh. I asked for the CFTC to drop the case. The CFTC and Thakkar’s legal team this week filed a motion to stay the case so a settlement agreement could be submitted to the Commissioners of the CFTC for final approval.
The CFTC Commissioners have one of three potential choices I see. They can approve the settlement, they can disapprove the settlement, or they can tell the Enforcement Division staff to drop the charges altogether.
My vote is for the last choice. The wise and fair CFTC commissioners should tell the Enforcement Division to drop the charges.
I don’t know what the settlement is. That is a secret. What I sense is that the CFTC settlement terms were better for Thakkar than their previous attempts to settle the case made months ago.
What I sense is that the process of deposing witnesses as part of the defense motion to dismiss the case was not producing any needle moving evidence that was going to enhance the CFTC case, even with the lower standard of proof necessary in a CFTC civil matter versus the previously dropped criminal case against Thakkar.
What I sense is that this settlement still came down to limiting the financial damage both sides were experiencing. Thakkar was having to foot the bill for the drawn out process of witness deposition. The CFTC was running a team of attorneys on a case that appeared to be going nowhere. A settlement saved both of them money.
What a settlement does for the CFTC is save face for some Division of Enforcement decision-makers who brought and persisted in this case. See, they have a settlement. Even if there is a “neither admit or deny” statement attached to a potential settlement, the CFTC still gets a press release.
What a settlement does for Thakkar is stop the financial bleeding and remove the huge emotional and intellectual cloud hanging over him. It allows him to move on with his life. Since I don’t know what the settlement is, I can’t speak to what this does for his reputation going forward.
However, for us, the industry, the settlement gives us little, as I have argued before. It does not give us clarity on the liability for software developers, whether in-house or outside vendors, for trading related functionality that can be used to spoof or otherwise disrupt the markets. What are the best practices to avoid similar cases being brought?
It still sent a terrible message about the potential exposure for industry members participating on CFTC workgroups and committees for their comments or expressions of beliefs. The CFTC had sought to depose former Technology Advisory Committee sub-committee members as part of this case.
There is still the matter of the commission implicitly creating new regulations about software development by bringing enforcement actions. While precedent is an important legal practice, thoughtful development of smart regulations around software developer liability first would be a better procedure than a settlement in this case.
I asked for Justice for Jitesh. I asked the CFTC to drop the case. Over 2500 people agreed with me and signed the online petition on Change.org asking for the same.
I politely and earnestly ask the CFTC commissioners and the chairman of the CFTC to vote to ignore the settlement agreement and drop the charges against Thakkar and Edge Financial Technologies. The downside for the CFTC is the loss of face for some Enforcement decision makers. The upside for the CFTC is the chance to thoughtfully make smarter regulations for software development liability. The latter is a better outcome for the CFTC’s mission “to promote the integrity, resilience, and vibrancy of the U.S. derivatives markets through sound regulation.”