2 Indian Americans, 6 Others Charged Over Alleged Market Manipulation Practices

By Little India Desk | February 1, 2018

Eight individuals, including two Indian Americans, have been publicly charged with federal crimes for allegedly engaging in deceptive trading practices in the United States.

Jitesh Thakkar, 41, of Naperville, Illinois, has been charged with conspiracy and spoofing offenses, according to the U.S. Department of Justice. New York-based Krishna Mohan, 33, is charged in a criminal complaint filed in the Southern District of Texas with commodities fraud and spoofing offenses. The offenses were allegedly committed when he was employed as a programmer and trader at a proprietary trading firm in Chicago, Illinois.

Five of the people charged, including Thakkar and Mohan, were arrested on Jan. 29. Among the others charged are Jiongsheng Zhao, who was arrested in Australia; Edward Bases and John Pacilio, who were arrested in Connecticut; UK resident James Vorley, and Cedric Chanu, who lives in the United Arab Emirates. The Justice Department in its announcement of charges on Jan. 29 also included Andre Flotron, a former precious metals trader at UBS, who was arrested in September following accusations of engaging in spoofing.

“Thakkar developed a software program that was used by Thakkar’s co-conspirator to engage in spoofing through the placement of thousands of orders on the Chicago Mercantile Exchange when Thakkar was the founder and principal of Edge Financial Technologies Inc.,” said the Department of Justice in a statement.

According to the complaint, it was traced through data analysis that Mohan was involved in a pattern of spoofing over 1,000 times in a two-month period.

Seven of the eight individuals were charged with the crime of spoofing — an illegal trading practice that can be used to manipulate the commodities markets. “Other than the individuals identified today, only three other individuals have ever been publicly charged with the crime of spoofing,” the statement added.

Among the individuals who have been identified, five were traders employed by global financial institutions, while two others were traders at large commodities trading firms, and one was the owner of a technology consulting firm.

“As alleged, the defendants in these cases engaged in sophisticated schemes or trading practices aimed at defrauding individuals and entities trading on U.S. futures exchanges,” said General John P. Cronan, the Acting Assistant Attorney.

He added that this kind of conduct presents a substantial amount of risk of eroding confidence in U.S. markets. It leads to the creation of unfair playing field for those traders and investors who take the legal route to do things.

“The Department and our law enforcement partners will use all of the tools at our disposal, including cutting-edge data analysis, to detect these types of schemes and to bring those who engage in them to justice.  Protecting the integrity of our markets remains a significant priority in our fight against economic crime,” Cronan said.

According to the charging documents, the spoof orders often had the effect of artificially depressing or artificially inflating the prices of futures contracts traded on CME, Chicago Board of Trade (CBOT), and the Commodity Exchange Inc., (COMEX).

The defendants, along with their co-conspirators, to take advantage of the artificial price levels created by their spoof orders, have been alleged to execute real, genuine orders to buy these at the artificially low prices or to sell at the artificially high prices. This was done to generate trading profits or to unlawfully lessen other trading losses.

“Their deceptive trading artificially affected the perception of supply and demand in the market and took away a level playing field for investors. We ask for those who observe indicators of this type of fraud to come forward to law enforcement so that we can stop those who attempt to exploit our financial system,” said Deputy Assistant Director Chris Hacker of the FBI’s Criminal Investigative Division.

He added that the FBI has taken enforcement action against multiple commodities traders who were spoofing trades through electronic trading platforms for their gain.

Director James McDonald of the U.S. Commodity Futures Trading Commission’s (CFTC) Division of Enforcement said that spoofing is a malicious example of bad actors seeking to manipulate the market through the abuse of technology.

“The technological developments that enabled electronic and algorithmic trading have created new opportunities in our markets. At the CFTC, we are committed to facilitating these market-enhancing developments. But at the same time, we recognize that these new developments also present new opportunities for bad actors,” he added.