July 14, 2016
First trader federally convicted for "spoofing" gets significant (below-guideline) prison term
As reported in this local article, headlined "Trader Michael Coscia 1st in nation to be sentenced under 'anti-spoofing' law," a notable new type of federal white-collar offender got a notable old-school type of punishment yesterday in federal court in Chicago. Here are some details:
In the outcome of a closely watched trial that could set precedent, convicted futures trader Michael Coscia was sentenced in federal court Wednesday to three years in prison and two years of supervised release for spoofing and commodities fraud.
Coscia, 54, of Rumson, N.J., was the first defendant in the country to stand trial under new anti-spoofing laws included in the 2010 Dodd-Frank Act. In November, he was found guilty of six counts of spoofing — the use of computer algorithms to rig markets in fractions of a second — and six counts of commodities fraud.
Prosecutors had recommended five to seven years in prison, while the defense had sought probation. Ultimately, U.S. District Judge Harry Leinenweber settled in the middle, citing Coscia's age and health, as well as the ambiguous amount of financial loss incurred by the victims.
"This is a very serious crime and it has serious consequences. ... (Coscia) has helped a lot of people over the years, not only family and friends, but also fellow traders. But he also engaged in spoofing and had no financial need to do so," Leinenweber said shortly before announcing the sentence.
Federal prosecutors were pleased with the outcome. "There was and has been this sort of suggestion throughout the course of this prosecution that this criminal case is somehow murky or unclear because of technology, because of the use of algorithms. Well, guess what? A lie is a lie. Deceit is deceit. ... The defendant cheated faceless victims out of money through deceit over the internet. Today's result and sentence, I think, is a reflection of that," U.S. Attorney Zachary Fardon said.
Assistant U.S. Attorney Sunil Harjani added that the sentence of imprisonment would send a message to traders in Chicago and throughout the U.S.
Coscia made about $1.4 million in only about two months by victimizing traders including those at Citadel, the Chicago financial services firm formed by billionaire Ken Griffin, when he manipulated the prices of futures contracts on the Chicago Mercantile Exchange, prosecutors have said.
Upon leaving the courtroom, Coscia declined to comment. He smiled as he hugged friends and family who had come to show support. During the hearing, he gave a brief statement asking for leniency and saying that he takes responsibility for his actions.
Stephen Senderowitz, Coscia's attorney, said he will file an appeal. During the hearing, Senderowitz emphasized that it's not clear how much money any individual trader lost because of Coscia's actions. That will be among the issues argued further during the appeal, during which the defense will also challenge the constitutionality of the spoofing law, he said afterward....
The Coscia case is "just the tip of the iceberg" in terms of the government's increasingly active role in such prosecutions, said Renato Mariotti, lead prosecutor on the case before recently joining a private practice. "For years, many people scoffed at the notion that the government could explain high-frequency trading strategies to judges and juries. No one is laughing anymore," Mariotti said in a statement after the sentencing.
Coscia commissioned the design of computer programs, known as algorithms, to manipulate prices in the markets of various commodities, including gold, soybean meal, soybean oil, high-grade copper, Euro FX and Pounds FX currency futures, prosecutors said.
Among Coscia's family, there was some feeling that the sentencing could have gone worse. During the hearing, Anthony Coscia, Michael Coscia's uncle and a counselor at a Catholic high school in Brooklyn, N.Y., quoted passages from Shakespeare and the Bible while speaking on behalf of his nephew's character.... "The judge seemed to show some compassion," the elder Coscia said as he left the courtroom.
July 14, 2016 at 12:44 PM | Permalink