There is a cloud hanging over the CFTC’s Technology Advisory Committee that does not involve Bitcoin. That cloud has darkened recently. The cloud is the civil case against Jitesh Thakkar, a one-time contributor to the TAC’s high frequency trading subcommittee.
Two of the three original charges brought by the Justice Department were dismissed by a federal judge after the government’s long list of witnesses failed to provide any evidence that Thakkar knew about his software client’s spoofing. The jury was hung 10 not-guilty to 2 on the remaining count and the Justice Department decided to drop the case. That a criminal case was brought against Mr. Thakkar without evidence of intent is troubling. There are many troubling issues for the industry with the prosecution, and some say persecution, of Jitesh Thakkar.
Edge Financial, Thakkar’s business, has been destroyed. The CFTC’s continuing civil case against Mr. Thakkar, after the criminal case was dismissed, comes with a lower barrier for proof. This continued pursuit of civil charges seems more about the CFTC not losing face than it does about seeking justice.
Mr. Thakkar is now defending his good name by declining CFTC offers to settle the case and refusing to plead guilty. He has shown that his good name is worth everything he has and more. The CFTC and DOJ cases against him implied he would sell his soul for about $24,000, the price of some software development work.
I can tell you that the vast difference in these two prices, the price Mr. Thakkar has put on his reputation and honor and the price of some hard-earned software development dollars, could not be more indicative of the wrongness of the CFTC’s continued case.
Why does this matter to me? Or to the industry? Because this unjust criminalization of software trading tools raises the risk and cost for everyone in the industry. And those raised costs have potential negative impact on market participation and market quality. For example, last month the CFTC’s attorneys told the court in Chicago that they need to take testimony from the members of the HFT subcommittee from 2012 to determine how much Thakkar knew about spoofing back then! This hyper-adversarial approach will certainly make it hard to attract participation on the TAC subcommittees from software developers as well as everyone else. Much of our hard work on the Technology Advisory Committee could be for naught due to this misguided continued prosecution.
Justice demands that the charges be dropped. Justice should include an apology, but that may be hoping for too much.