Prosecutors have scored a win in their latest criminal spoofing trial, United States v. Vorley. After three days of deliberation—during which time the jury repeatedly informed the court that it was deadlocked—the jury has convicted precious metals traders James Vorley and Cedric Chanu of committing wire fraud. At the same time, the jury rejected the government’s allegations that the defendants had participated in a criminal conspiracy by allegedly coordinating spoofed trades with other market participants.
The inconsistent verdicts on wire fraud and conspiracy will almost certainly put the defendants on the path to an appeal before the Seventh Circuit Court of Appeals. To convict Vorley and Chanu on the wire fraud counts, the government was required to prove beyond a reasonable doubt that they knowingly and intentionally participated in a scheme to defraud other market participants by making materially false representations. And at a high level, a conspiracy is an agreement between two or more persons to accomplish an unlawful purpose. The jury’s split verdict suggests there could have been some confusion surrounding the intent requirements for the charges at issue. This could further implicate the manner in which the government presented its evidence at trial and the instructions provided to jurors before they went into deliberations.
Even the government’s decision to charge the defendants’ spoofing activity under the wire fraud statute was controversial. Because the charges arise from trading conduct that occurred from 2009 to 2011, the government did not rely on the criminal anti-spoofing amendments added to the Commodity Exchange Act (CEA) in 2011. Nonetheless, the government has long held that spoofing is a form of market manipulation that was illegal even before it was specifically outlawed. Now the Vorley verdict (if not overturned on appeal) provides the government with another avenue to prosecute spoofing, potentially in parallel to the CEA.
And like all facets of life during the pandemic, the trial was overshadowed by numerous concerns related to COVID-19. For example, the court ruled that certain government witnesses could appear at trial via video conference due to travel restrictions and health concerns. The defendants had argued that such an arrangement would violate their constitutional rights to confront witnesses against them in-person. Moreover, as the trial was reaching its conclusion, one juror reportedly experienced respiratory issues rendering him severely ill and two other jurors were excused due to health concerns, as well.
Despite facing numerous obstacles, the government was able to pull off a significant win—at least for now. Vorley remains a case to watch as the enforcement landscape for financial fraud and market manipulation continues to develop.