Replies to post #573553 on NorthWest Biotherapeutics Inc (NWBO)

[hope4patients]

Prosecuting = criminal. The NWBO vs Citadel case is civil. Very different burden of proof.

[ae kusterer]

Poor Man - The DOJ got a $920 million spoofing conviction versus JPM. See articles 1/2,3 below.



Poor Man -

Re: lutherBlissett post# 573548

Monday, March 06, 2023 8:03:30 AM

Post#
573553
of 573558
Someone else used the term robot in connection to a spoofing defense, and I joked they should buy a Roomba.

I’m having my morning coffee ahead of a very busy day. But this evening I’ll repost the New York Times article about the difficulty with prosecuting spoofing.

And revisit why it’s in shareholders best interest to settle this case.



1)Department of Justice
Office of Public Affairs
FOR IMMEDIATE RELEASE
Tuesday, September 29, 2020
JPMorgan Chase & Co. Agrees To Pay $920 Million in Connection with Schemes to Defraud Precious Metals and U.S. Treasuries Markets
JPMorgan Chase & Co. (JPMorgan), a New York, New York-based global banking and financial services firm, has entered into a resolution with the Department of Justice to resolve criminal charges related to two distinct schemes to defraud: the first involving tens of thousands of episodes of unlawful trading in the markets for precious metals futures contracts, and the second involving thousands of episodes of unlawful trading in the markets for U.S. Treasury futures contracts and in the secondary (cash) market for U.S. Treasury notes and bonds.

JPMorgan entered into a deferred prosecution agreement (DPA) in connection with a criminal information filed today in the District of Connecticut charging the company with two counts of wire fraud. Under the terms of the DPA, JPMorgan will pay over $920 million in a criminal monetary penalty, criminal disgorgement, and victim compensation, with the criminal monetary penalty credited against payments made to the Commodity Futures Trading Commission (CFTC) under a separate agreement with the CFTC being announced today and with part of the criminal disgorgement credited against payments made to the Securities Exchange Commission (SEC) under a separate agreement with the SEC being announced today.

“For over eight years, traders on JP Morgan’s precious metals and U.S. Treasuries desks engaged in separate schemes to defraud other market participants that involved thousands of instances of unlawful trading meant to enhance profits and avoid losses,” said Acting Assistant Attorney General Brian C. Rabbitt of the Justice Department’s Criminal Division. “Today’s resolution — which includes a significant criminal monetary penalty, compensation for victims, and requires JP Morgan to disgorge its unlawful gains — reflects the nature and seriousness of the bank’s offenses and represents a milestone in the department’s ongoing efforts to ensure the integrity of public markets critical to our financial system.”

“JPMorgan engaged in two separate years-long market manipulation schemes,” said U.S. Attorney John H. Durham of the District of Connecticut. “Not only will the company pay a substantial financial penalty and return money to victims, but this agreement requires JPMorgan to self-report violations of the federal anti-fraud laws and cooperate in any future criminal investigations. I thank the FBI for its dedication in investigating these deceptive trading practices and other sophisticated financial crimes.”

“For nearly a decade, a significant number of JP Morgan traders and sales personnel openly disregarded U.S. laws that serve to protect against illegal activity in the marketplace,” said Assistant Director in Charge William F. Sweeney Jr. of the FBI’s New York Field Office. “Today's deferred prosecution agreement, in which JP Morgan Chase and Co. agreed to pay nearly one billion dollars in penalties and victim compensation, is a stark reminder to others that allegations of this nature will be aggressively investigated and pursued.”

According to admissions and court documents, between approximately March 2008 and August 2016, numerous traders and sales personnel on JPMorgan’s precious metals desk located in New York, London, and Singapore engaged in a scheme to defraud in connection with the purchase and sale of gold, silver, platinum, and palladium futures contracts (collectively, precious metals futures contracts) that traded on the New York Mercantile Exchange Inc. and Commodity Exchange Inc., which are commodities exchanges operated by the CME Group Inc. In tens of thousands of instances, traders on the precious metals desk placed orders to buy and sell precious metals futures contracts with the intent to cancel those orders before execution, including in an attempt to profit by deceiving other market participants through injecting false and misleading information concerning the existence of genuine supply and demand for precious metals futures contracts. In addition, on certain occasions, traders on the precious metals desk engaged in trading activity that was intended to deliberately trigger or defend barrier options held by JPMorgan and thereby avoid losses.

One of the traders on the precious metals desk, John Edmonds, 38, of Brooklyn, New York, pleaded guilty on Oct. 9, 2018, to one count of commodities fraud and one count of conspiracy to commit wire fraud, commodities fraud, commodities price manipulation, and spoofing, and his sentencing, at this time, has not been scheduled before U.S. District Judge Robert N. Chatigny of the District of Connecticut. Another one of the traders on the precious metals desk, Christian Trunz, 35, of New York, New York, pleaded guilty on Aug. 20, 2019, to one count of conspiracy to engage in spoofing and one count of spoofing in connection with his precious metals futures contracts trading at JPMorgan and another financial services firm, and his sentencing is scheduled for Jan. 28, 2021, before U.S. District Judge Sterling Johnson of the Eastern District of New York.

Finally, as part of the investigation, the department obtained a superseding indictment on Nov. 15, 2019 against three former JPMorgan traders, Gregg Smith, Michael Nowak, and Christopher Jordan, and one former salesperson, Jeffrey Ruffo, in the Northern District of Illinois that charged them for their alleged participation in a racketeering conspiracy and other federal crimes in connection with the manipulation of the precious metals futures contracts markets. An indictment is merely an allegation and all defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.

Also according to admissions and court documents, between approximately April 2008 and January 2016, traders on JPMorgan’s U.S. Treasuries desk located in New York and London engaged in a scheme to defraud in connection with the purchase and sale of U.S. Treasury futures contracts that traded on the Chicago Board of Trade, which is a commodities exchange operated by the CME Group Inc., and of U.S. Treasury notes and bonds traded in the secondary cash market (the U.S. Treasury futures, notes, and bonds, collectively, U.S. Treasury Products). In thousands of instances, traders on the U.S. Treasuries desk placed orders to buy and sell U.S. Treasury Products with the intent to cancel those orders before execution, including in an attempt to profit by deceiving other market participants through injecting false and misleading information concerning the existence of genuine supply and demand for U.S. Treasury Products.

As part of the DPA, JPMorgan, and its subsidiaries JPMorgan Chase Bank, N.A. (JPMC) and J.P. Morgan Securities LLC (JPMS) have agreed to, among other things, continue to cooperate with the Fraud Section and the U.S. Attorney’s Office for the District of Connecticut in any ongoing or future investigations and prosecutions concerning JPMorgan, JPMC, JPMS, and their subsidiaries and affiliates, and their officers, directors, employees and agents. As part of its cooperation, JPMorgan, JPMC, and JPMS are required to report evidence or allegations of conduct which may constitute a violation of the wire fraud statute, the anti-fraud, anti-spoofing and/or anti-manipulation provisions of the Commodity Exchange Act, the securities and commodities fraud statute, and federal securities laws prohibiting manipulative and deceptive devices. In addition, JPMorgan, JPMC, and JPMS have also agreed to enhance their compliance program where necessary and appropriate, and to report to the government regarding remediation and implementation of their enhanced compliance program.

The department reached this resolution with JPMorgan based on a number of factors, including the nature and seriousness of the offense conduct, which spanned eight years and involved tens of thousands of instances of unlawful trading activity; JPMorgan’s failure to fully and voluntarily self-disclose the offense conduct to the department; JPMorgan’s prior criminal history, including a guilty plea on May 20, 2015, for similar misconduct involving manipulative and deceptive trading practices in the foreign currency exchange spot market (FX Guilty Plea); and the fact that substantially all of the offense conduct occurred prior to the FX Guilty Plea.

JPMorgan received credit for its cooperation with the department’s investigation and for the remedial measures taken by JPMorgan, JPMC, and JPMS, including suspending and ultimately terminating individuals involved in the offense conduct, adopting heightened internal controls, and substantially increasing the resources devoted to compliance. Significantly, since the time of the offense conduct, and following the FX Guilty Plea, JPMorgan, JPMC, and JPMS engaged in a systematic effort to reassess and enhance their market conduct compliance program and internal controls. These enhancements included hiring hundreds of new compliance officers, improving their anti-fraud and manipulation training and policies, revising their trade and electronic communications surveillance programs, implementing tools and processes to facilitate closer supervision of traders, taking into account employees’ commitment to compliance in promotion and compensation decisions, and implementing independent quality assurance testing of non-escalated and escalated surveillance alerts. Based on JPMorgan’s, JPMC’s and JPMS’ remediation and the state of their compliance program, the department determined that an independent compliance monitor was unnecessary.

Today, the CFTC announced a separate settlement with JPMorgan, JPMC, and JPMS in connection with a related, parallel proceeding. Under the terms of that resolution, JPMorgan agreed to pay approximately $920 million, which includes a civil monetary penalty of approximately $436 million, as well as restitution and disgorgement that will be credited to any such payments made to the department under the DPA. Also, the SEC announced today a separate settlement with JPMS in connection with a related, parallel proceeding regarding trading activity in the secondary cash market for U.S. Treasury notes and bonds. Under the terms of that resolution, JPMS agreed to pay $10 million in disgorgement and a civil monetary penalty of $25 million.

The FBI’s New York Field Office investigated this case. Assistant Chief Avi Perry and Trial Attorney Matthew F. Sullivan of the Fraud Section and Assistant U.S. Attorney Jonathan Francis of the District of Connecticut prosecuted the case.

Individuals who believe that they may be a victim in this case should visit the Fraud Section’s Victim Witness website at https://www.justice.gov/criminal-vns/case/jpmorgan-dpa or call [phone].

The year 2020 marks the 150th anniversary of the Department of Justice. Learn more about the history of our agency at www.Justice.gov/Celebrating150Years.




2)The acquittal of a former UBS precious metals trader last month shows that prosecutors will continue to struggle to prove when a trading strategy crosses the line into criminal conduct.
The acquittal of a former UBS precious metals trader last month shows that prosecutors will continue to struggle to prove when a trading strategy crosses the line into criminal conduct.Credit...Stefan Wermuth/Bloomberg

By Peter J. Henning
May 3, 2018
Federal prosecutors sometimes lose trials, and it is usually not considered too much of a setback. But when the loss involves only the second prosecution for a new crime called “spoofing,” it raises questions about how the government will pursue future cases.

A former UBS precious metals trader, Andre Flotron, was acquitted by a jury in Connecticut last month after only a few hours of deliberation. Mr. Flotron had been charged with conspiracy to commit commodities fraud for allegedly placing “trick orders” designed to fool others into believing there was more buying or selling interest than actually existed.

The verdict shows that prosecutors will continue to struggle to prove when a trading strategy crosses the line into criminal conduct. Seven other defendants are facing spoofing charges in Chicago and Houston, and their lawyers are sure to try the same tactics that worked in defending Mr. Flotron.

The crime of spoofing was added to the criminal lexicon in the Dodd-Frank Act in 2010. The law prohibits “bidding or offering with the intent to cancel the bid or offer before execution.” Like most white-collar crimes, it revolves largely around proving the defendant’s intent to affect the market by placing orders with no plan to have them filled.

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The problem is that most orders in the securities and commodities markets go unfilled, so canceling orders cannot be criminal just by itself. A 2013 study by the Securities and Exchange Commission found that fewer than 5 percent of orders placed on stock exchanges were filled. So simply showing that an investor canceled trades on a regular basis may not be enough to prove the intent necessary for a spoofing violation.

The first spoofing conviction involved Michael Coscia, who was charged with creating an algorithm to enter and cancel large orders in milliseconds. Mr. Coscia would simultaneously put in small orders that would be profitable once other traders reacted to the artificial ones. In that case, the government focused on the large number of orders his algorithm generated, making his testimony that he wanted every order filled questionable. The jury returned its guilty verdict after only one hour of deliberation, showing that it found the statistical evidence of large-scale order cancellations persuasive.

The prosecution of Mr. Flotron, though, started badly for the government. Jeffrey Alker Meyer, a federal district judge in New Haven, dismissed six of the seven charges in February. The judge found that the trades identified in those charges occurred only in Chicago, where the commodities exchanges operate, so under the constitutional venue requirement no crime was committed in Connecticut. That left just the conspiracy charge.

To prove spoofing, the Justice Department relied on two traders who worked for Mr. Flotron to explain how he taught them to enter and then cancel orders to influence the direction of the commodity prices. Both testified after receiving non-prosecution agreements from the government, which meant their claims were open to question about whether they got a deal to point the finger at Mr. Flotron.

In Mr. Flotron’s case, there was no algorithm or automated trading for the government to point to. Instead, his orders were placed manually, and some were kept open for up to a minute. That made it more difficult for prosecutors to show that his goal was to manipulate other traders, when there was at least a chance the order would be filled.


Adding to the government’s burden, there are few mom-and-pop investors putting in orders for precious metals like gold and silver futures and other complex financial products that Mr. Flotron traded. Most transactions involve sophisticated firms that use algorithms to try to predict price movements and profit from small changes. That meant prosecutors could not offer up appealing victims as witnesses.

The elusive issue in white-collar cases is almost always intent. Spoofing puts the spotlight on distinguishing between ordinary trading activity and a pattern of order cancellations that crosses an unidentified line of criminality.

Mr. Coscia’s conviction gave prosecutors greater confidence in how to prove spoofing. Mr. Flotron’s acquittal raises the question of how many cancellations are too many to show an illegal intent rather than a permissible trading program.

For defendants facing charges of spoofing, that means the more they can show the human element in trading — and how their conduct differs little from that of other players in the markets — the greater the possibility that the jury will return a verdict in their favor.






3) LEGAL/REGULATORY | WHITE COLLAR WATCH
‘Spoofing,’ a New Crime With a Catchy Name
BY PETER J. HENNING OCTOBER 6, 2014 12:39 PM October 6, 2014 12:39 pm
High-frequency trading firms rely on computer programs, not humans, for the execution of their trades.
High-frequency trading firms rely on computer programs, not humans, for the execution of their trades.Credit Richard Drew/Associated Press

White Collar Watch
Giving a crime a catchy moniker is a good way to get attention when prosecutors pursue a new form of misconduct. There is, for instance, a type of money laundering called “smurfing,” named for the cute blue cartoon characters, that involves runners for a drug organization making small cash deposits at various banks to avoid the currency transaction reporting rules.

Now there is “spoofing,” a form of market manipulation. Last week, the Justice Department filed charges against Michael Coscia in what it said was the first criminal indictment for spoofing. While not quite as evocative as smurfing, spoofing involves an effort to fool market participants into believing there are large orders for futures contracts to draw them into making trades. Mr. Coscia is accused of placing orders that he planned to cancel to induce others to buy or sell in response, thereby artificially driving prices up or down so that he could then trade.

Regulators have begun focusing on spoofing because of the rise of high-frequency trading firms, which now account for as much as 50 percent of stock trades. The firms use computer programs to buy and sell securities and futures contracts that react almost instantaneously to small movements in the market. In July, Reuters reported that the Securities and Exchange Commission was looking at 10 brokers for possible spoofing, along with a related form of manipulation called “layering,” which involves placing multiple orders at different prices to give the appearance of significant trading interest.

Mr. Coscia operated a high-frequency trading firm, Panther Energy Trading, that used computer programs called Flash Trader and Quote Trader to enter large orders that were quickly canceled; the intention was to move the price to where he wanted an order executed. In 2013, he settled civil charges filed by the Commodity Futures Trading Commission by paying $2.8 million in penalties and disgorgement, along with a $900,000 penalty to the Financial Conduct Authority of Britain for violations in London. The Dodd-Frank Act specifically gives the commodity commission the authority to pursue spoofing of futures contracts, which is defined as “bidding or offering with the intent to cancel the bid or offer before execution.”

The criminal charges raise spoofing to a new level. Mr. Coscia now faces a potential prison sentence of more than five years under the advisory federal sentencing guidelines, based on the claim in the indictment that his trading strategy earned nearly $1.6 million in profit. The Justice Department’s prosecution also poses a threat to other high-frequency trading firms that may employ a trading strategy using a high volume of orders that are quickly canceled.

In this case, it is interesting to note, the profits from the six trades cited by the government were tiny, and the victims were not sympathetic characters like individual investors or pension funds.

The indictment describes how Mr. Coscia’s programs would enter small buy or sell orders for future contracts that he wanted to have filled. He then placed large orders on the other side of that trade at a higher or lower price to entice others to enter the market on the belief that the larger order would affect the price. Once the price moved so that his small order was filled, the program canceled the large orders. The program would then do the same transaction in reverse by entering another round of large orders that would move the price up or down to allow for Mr. Coscia to exit the position at a profit.

The price differences were small, sometimes fractions of a penny, so that the profits were quite modest on an individual set of trades. The indictment sets out 12 charges against Mr. Coscia, six counts of commodities fraud and six counts of spoofing, based on trading in September 2011. The total profit from those transactions amounted to about $1,070.

Mr. Coscia’s firm engaged in thousands of trades to generate the estimated profits of nearly $1.6 million. But prosecutors needed to narrow the charges to just a few transactions if they hoped to obtain a conviction because introducing evidence of every trade would risk putting the judge and jury to sleep. But with just a limited number of trades, there is also the danger that Mr. Coscia’s lawyer will question why such small amounts are worthy of a federal prosecution and try to portray the trading as innocuous.

As is usually the case in a white-collar crime prosecution, the Justice Department’s biggest hurdle will be proving intent. The government must show that the design of the computer program is circumstantial evidence of Mr. Coscia’s intent to defraud other traders by misleading them with the large orders that he planned to cancel before they could be filled.

It is not a defense to argue that “everyone else was doing it” — a point that our mothers and kindergarten teachers drilled into us. But Mr. Coscia can offer a good faith defense, which is available for any crime requiring proof of fraudulent intent. He may try to show that other high-frequency traders routinely cancel orders, with estimates of as many as 90 percent of all orders being canceled before they are executed. It is not a matter of claiming that what he did was right because everyone else did it, but rather that there was no intent to defraud when traders know that most orders quickly disappear and are never filled.

The victims of Mr. Coscia’s trading strategy may not be appealing to a jury either: other high-frequency trading firms. The indictment describes in detail how a set of trades and canceled orders took place in less than a tenth of a second. Only firms using computer programs to buy and sell in the blink of an eye could respond to the type of spoofing the Justice Department is prosecuting. So it would not be a surprise if Mr. Coscia argued that these sophisticated firms engaged in similar conduct through their own trading strategies and were not defrauded by orders entered by his program.

The indictment seeks to hold Mr. Coscia liable for trades executed in milliseconds by a computer, including one trade at 4:54 a.m. when he was probably asleep. The spoofing charges may send a chill through the high-frequency trading world because the evidence of fraudulent intent will come from a program that uses rapid-fire orders and does not depend on humans for its execution. So finding that Mr. Coscia engaged in spoofing may come down to a jury deciding whether one computer fooling another is a crime.

[The Danish Dude]

And revisit why it’s in shareholders best interest to settle this case.

Unless that will be in the kind of a .......



offer ... to make that statement true, will require a settlement to be > $1B, otherwise I'll take discovery mode and a split civil/criminal lawsuit any day.

[DrHigh]

Why $100million though? You feel like if NWBO countered with $200 or $300million, Citadel would balk and allow this to go to court?