High-Frequency Trader Convicted of Disrupting Commodity Futures Market in First Federal Prosecution of Spoofing U.S. Attorney’s Office November 03, 2015
Northern District of Illinois (312) 353-5300
CHICAGO, IL—In the first federal prosecution of its kind, a high-frequency trader was convicted today of disrupting commodity futures prices in a $1.4 million fraud scheme.
MICHAEL COSCIA, 53, used an automated trading technique to commit a crime known as “spoofing” to earn illegal profits from orders he placed through Chicago-based CME Group and London-based ICE Futures Europe. Coscia commissioned the design of two computer programs, known as algorithms, to implement his fraudulent strategy at his New Jersey trading firm.
The jury in federal court in Chicago deliberated for approximately one hour before convicting Coscia on all 12 counts, including 6 counts of commodities fraud and 6 counts of spoofing. Each count of commodities fraud carries a maximum sentence of 25 years in prison and a $250,000 fine, while each count of spoofing carries a maximum sentence of ten years in prison and a $1 million fine. U.S. District Judge Harry D. Leinenweber scheduled a sentencing hearing for March 17, 2016, at 9:45 a.m.
The indictment against Coscia, of Rumson, N.J., marked the first federal prosecution nationwide under the anti-spoofing provision that was added to the Commodity Exchange Act by the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. The case was prosecuted by Assistant United States Attorneys Renato Mariotti and Sunil Harjani of the Securities and Commodities Fraud Section of the U.S. Attorney’s Office in Chicago. The section, which was created in 2014, is dedicated to protecting markets and preserving investors’ confidence.
“The defendant’s trading activities disrupted the markets in his favor and against legitimate traders and investors,” said Zachary T. Fardon, United States Attorney for the Northern District of Illinois. “We have to have fairness and integrity in our markets. And enforcement, including federal criminal prosecutions, is an important tool to protecting those values. The jury’s verdict exemplifies the reason we created the Securities and Commodities Fraud Section in Chicago, which will continue to criminally prosecute these types of violations.”
Mr. Fardon announced the conviction along with Michael J. Anderson, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.
High-frequency trading is a form of automated trading that uses computer algorithms for placing a high volume of trading orders in milliseconds. It is illegal for traders to engage in spoofing, which involves placing “bids” to buy or “offers” to sell a futures contract with the intent to cancel the bid or the offer before execution.
Evidence at the seven-day trial showed that Coscia engaged in spoofing in the markets of various commodities, including gold, soybean meal, soybean oil, high-grade copper, Euro FX and Pounds FX currency futures. In less than three months in 2011, Coscia illegally profited nearly $1.4 million.
Coscia has been a registered commodities trader since 1988. In 2007, he formed Panther Energy Trading LLC in Red Bank, N.J.
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SEC: Citigroup/C Provided Incomplete Blue Sheet Data for 15 Years
FOR IMMEDIATE RELEASE 2016-138
SEC order www.sec.gov/litigation/admin/2016/34-78291.pdf
Washington D.C., July 12, 2016 — The Securities and Exchange Commission today announced that Citigroup Global Markets has agreed to pay a $7 million penalty and admit wrongdoing to settle charges that a computer coding error caused the firm to provide the agency with incomplete “blue sheet” information about trades it executed.
According to the SEC’s order instituting a settled administrative proceeding, the coding error occurred in the software that Citigroup used from May 1999 to April 2014 to process SEC requests for blue sheet data, including the time of trades, types of trades, volume traded, prices, and other customer identifying information. During that 15-year period, Citigroup consequently omitted 26,810 securities transactions from its responses to more than 2,300 blue sheet requests. After discovering the coding error, Citigroup failed to report the incident to the SEC or take any steps to produce the omitted data until nine months later.
“Broker-dealers have a core responsibility to promptly provide the SEC with accurate and complete trading data for us to analyze during enforcement investigations,” said Robert A. Cohen, Co-Chief of the SEC Enforcement Division’s Market Abuse Unit. “Citigroup did not live up to that responsibility for an inexcusably long period of time, and it must pay the largest penalty to date for blue sheet violations.”
The SEC’s investigation was conducted by Martin Zerwitz, Michael C. Baker, and Deborah A. Tarasevich of the Market Abuse Unit, and the case was supervised by Mr. Cohen.
Other SEC cases involving failures to provide complete blue sheet data:
Credit Suisse Securities (USA) LLC paid a $4.25 million penalty in September 2015, admitting that technological and human errors resulted in the omission of more than 553,400 reportable trades from blue sheet responses to the SEC for more than two years. OZ Management LP paid a $4.25 million penalty in July 2015, admitting that it provided inaccurate trade data to four of its prime brokers and caused blue sheet violations for nearly six years.
Scottrade paid a $2.5 million penalty in January 2014, admitting that a computer coding error resulted in the omission of trades from blue sheet responses to the SEC for more than six years.
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