USA v Vorley and Chanu: DOJ Looking For Conviction Against Spoofers

Thom Thompson

Thom Thompson

Editor

On Tuesday, the defense finished cross examining the FBI special agent, the prosecution rested its case, defense declined to offer witnesses, prosecution made its closing arguments, defense made its closing arguments, Judge Tharp instructed the jury and the jury began deliberating the fates of James Vorley and Cedric Chanu. 

The two were co-workers on the precious metals trading desk of Deutsche Bank in London where they were alleged to have spoofed the COMEX silver and gold futures markets from 2008 to 2013. A third, junior trader, David Liew, pleaded guilty two years ago. Vorley and Chanu did not offer any testimony during the trial. 

The bank settled related charges with the CFTC in 2018, accepting a $30 million penalty. 

Missing evidence 

During closing arguments Tuesday, Vorley’s attorney Roger Burlingame asked repeatedly where all the evidence was against his client. (Burlingame is a familiar presence in the Dirksen courthouse, having recently defended London spoofer Navinder Sarao, getting him a sweetheart time-served/house arrest sentence last year.) As an example of missing evidence, prosecution witnesses established that there were video and voice recordings of interviews of their star witness, David Liew, that were not offered in evidence.

Liew, who was supervised by Vorley, had frequent video chats with his boss as he transferred the trading book every day from Singapore to London, but none of them was made available to the jury. No other contemporaneous evidence of the Liew/Vorley/Chanu conspiracy was forthcoming from the prosecution and the jury has to rely on Liew’s memories as well as a handful of chat transcripts plucked from three years of teamwork. 

Burlingame reminded the jury that the carefully drawn graphs the prosecution had presented had actually been prepared by outside consultants at the Analysis Group and that they had cost the government more than a million dollars. He also pointed out that the graphs, which were painstakingly crafted, omitted transactions between Deutsche Bank and the spoofing “victims” Citadel Securities and Quantlab that occurred during the episodes they put into evidence.

Neither representative from Citadel Securities and Quantlab could recall the dates and times in question. Far from tallying up the damages they allegedly suffered, it seems neither company had been aware of being spoofed.

The compliance officer from Deutsche Bank who testified began working there well after the latest of the episodes covered during the trial. He had no direct knowledge of the defendants or of their activities while at the bank.

Liew was the only witness called by the government who could provide direct evidence. Burlingame also pointed out that Liew’s deal with the government compromised the integrity of his testimony.   

Bluffing

In their closing argument, the prosecution tried to wow the jurors by saying that the plaintiffs had traded $2.6 billion worth of silver and gold futures contracts during the 61 spoofing episodes. There are lots of problems with that kind of shocking number, especially since they did not say whether the trades were ultimately winning ones or not. Were they speculative trades or put on as hedges of cash trades? 

Another problem is that futures trading is all about the price movement after you put on a position and not the price level at which it was traded. Someday, I hope opposing counsel pulls a microeconomics professor out of a hat to explain that as far as risk-neutral pricing models go, the expected value of a futures contract is zero when it is purchased/sold. The contracts the defendants bought had an expected value of zero, not $2.6 billion.  

The prosecution entered into evidence a transcript of a chat between Vorley and a trader at UBS in which Vorley accuses UBS of spoofing – which Vorley says in the chat is illegal. The defense challenged the appropriateness (admissibility?) of the chat because Vorley’s ability to identify his counterparty demonstrated that they were talking about another marketplace than COMEX, since trading there is anonymous. The prosecution insisted that “illegal is illegal” and managed to get the transcript into evidence. 

Jury deliberations in the time of COVID

The eleven members of the jury began deliberations shortly after 4:00 pm on Tuesday. Judge Tharp told the jury he expected them to follow the normal schedule of working until 5:00. He said they could stay as late as 6:00, when the building closes to the public, if they cared to.

Eleven jury members? The jury experienced a reduction-in-force Tuesday morning after one juror called in to say that they were suffering with COVID-19 symptoms, as yet unconfirmed. The remaining thirteen jurors were polled about whether they felt safe enough to continue with testimony. Two of them took the option to leave and to be tested. The defendants and, separately, their counsel as well as the prosecution stipulated that they would proceed with eleven jurors. 

The affected juror is expected to report their test result once it is available but they are not permitted to rejoin the jury. 

The jurors meet in person for their deliberations. 

In the meantime, the potential for, and maybe the reality of, an infected juror can affect the jury’s process. For one, it could stimulate the jurors to hurry to a verdict to minimize further contact with one another. It could prompt Judge Tharp to accept a hung jury determination earlier because, again, the risk of COVID-19 infection is ever present. Will all of the jurors who stayed on Tuesday even be willing to return to the jury room on Wednesday? And if another juror falls ill, a mistrial will almost certainly be declared.    

John Lothian Newsletter

Today’s Newsletter

We visit more than 100 websites daily for financial news (Would YOU do that?)

Now Read This

Pin It on Pinterest

Share This Story