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On April 14, 2022, the Financial Crimes Enforcement Network (FinCEN) issued an advisory focusing on detecting kleptocrats (i.e., government officials who appropriate national resources for personal gain) and the proceeds of foreign public corruption and preventing them from entering the U.S. financial system. This guidance is the latest in a series of advisories FinCEN has issued focusing on Russian kleptocracy, and is part of a broader strategic initiative among key U.S. and global law enforcement and regulatory agencies focusing on corruption and money laundering as critical national security risks. In particular, the advisory highlights the enhanced focus of U.S. enforcement resources on the attempts of Russian oligarchs to evade sanctions imposed by the United States and its allies in response to Russia’s invasion of Ukraine.

U.S. law enforcement and regulatory agencies have high expectations as to the compliance efforts U.S. companies will adopt to meet this moment. Enforcement against companies and individuals involved in missteps is likely to be aggressive and robustly resourced. Indeed, the Department of Justice (DOJ) announced on April 6, 2022, in connection with the unsealing of an indictment of a Russian oligarch charged with U.S. sanctions violations, that it will “work relentlessly to counter Russian aggression, including by enforcing U.S. sanctions law.”…
Continue Reading As Russia Sanctions Mount, FinCEN Issues Advisory on Kleptocracy and Foreign Public Corruption

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. …
Continue Reading Jury Convicts on Wire Fraud Charges in Criminal Spoofing Case

The criminal spoofing trial in United States v. Vorley kicked off in the U.S. District Court for the Northern District of Illinois on September 14, 2020.  Less than 10 days later, on the first full day of deliberations, jurors sent a note to the court indicating they had reached an impasse, with two jurors holding out against a consensus on the verdict.  Following this development, the court denied the defendants’ request to declare a mistrial and instructed the jury to continue deliberations.

The jury’s difficulty in reaching a verdict on the complicated charges may foreshadow a similar outcome that occurred last year in the criminal trial of software developer Jitesh Thakkar.  In that case, Jitesh faced spoofing charges stemming from his company’s development of software that was later used by a London-based trader to spoof E-Mini S&P 500 futures contracts, which allegedly led to the “flash crash” of 2010.  The trial judge granted Thakkar’s mid-trial motion for a judgment of acquittal on a conspiracy charge based on the lack of evidence of any agreement between Thakkar and the London trader, but the judge allowed the spoofing counts to proceed to the jury.  The jury deadlocked 10-2 in favor of Thakkar on those charges and the government eventually dropped its case.
Continue Reading Latest Criminal Spoofing Trial Hampered by Obstacles

A new $2 million SBA safe harbor for PPP loans appears to create a wide umbrella that substantially reduces the risk that adverse consequences will rain down and soak companies with loans in this category. Perkins Coie attorneys examine the May 13 guidance and say companies will continue to benefit from conducting a PPP “necessity”…

As this blog has previously noted, the Coronavirus pandemic, like other crises before it, is likely to increase prosecutions for fraud, particularly under the Payment Protection Program (“PPP”) created by the federal government’s Coronavirus stimulus packages.  Two new prosecutions announced by the Department of Justice mark some of the first prosecutions under the PPP, and signal where and how the government will be looking for wrongdoing.
Continue Reading Prosecutions Related to Coronavirus Stimulus Begin

On April 14, 2020, the U.S. Department of Justice made a long-awaited move towards enhanced transparency into the corporate compliance monitorship selection process in launching a new webpage that lists the names of all independent compliance monitors for the Fraud Section’s thirteen active monitorships.  Seven of the active monitorships are associated with the FCPA Unit,…

The U.S. Court of the Appeals for the Ninth Circuit recently held that criminal defendants who gain unlawful proceeds from certain offenses must pay back those proceeds—even when they no longer possess them.  More specifically, the government may obtain “personal money judgments” that can be satisfied through the defendants’ untainted (and currently unidentified or even future) assets.

This ruling—reaffirming prior case law recently called into question—will impact defendants in cases involving economic crimes and forfeiture.
Continue Reading Crime Doesn’t Pay, But Defendants Still Left with the Bill

The German Federal Ministry of Justice and Consumer Protection recently presented draft legislation to Parliament that could pose a marked shift in how corporate crimes are sanctioned in Germany. If enacted, this draft legislation, titled the Corporate Sanctions Act (“CSA”), would permit the criminal prosecution and conviction of a corporate entity in circumstances where the entity’s directors or officers committed corporate crimes, and where the entity failed to take reasonable precautions to prevent employees or agents from engaging in criminal wrongdoing. Companies based or doing business in Germany will be subject to the law.
Continue Reading Germany Proposes New Corporate Sanctions Act with Global Reach

The DOJ has raised the stakes in criminal spoofing enforcement, unveiling sweeping charges against three traders who allegedly conspired to manipulate the precious metals market.  While the DOJ’s involvement in spoofing enforcement—an area previously dominated by civil regulators and SROs—has become more commonplace, the DOJ is using a new tactic in this latest enforcement action.  In addition to the usual spoofing and other financial crime offenses, the indictment charges the traders with a racketeering conspiracy.  The DOJ’s reliance on RICO increases the possible penalties for spoofing, while also potentially making the government’s case simpler to prove.

A Potential New Era of Spoofing Enforcement

After obtaining mixed results in its previous spoofing trials, the DOJ appears to be retooling its approach.  Indeed, the indictment against these precious metals traders marks the first time the DOJ has alleged RICO violations against traders accused of spoofing electronic derivatives markets. Thus, while the alleged spoofing conduct may be familiar, the charges brought are significantly different and more serious than before.  And so are the potential penalties.  In addition to hefty incarceration sentences, RICO provides for the government to seek forfeiture of all proceeds derived from the racketeering activity.
Continue Reading DOJ Brings Novel RICO Charges Against Alleged Spoofers

The DOJ is increasingly using a “data focused approach” to identify economic crime and corporate misconduct, according to a DOJ official.  In remarks to the 6th Annual Government Enforcement Institute, Deputy Assistant Attorney General Matthew S. Miner recently shared that using data analytics to identify fraud improves efficiency, expedites case development, and makes program enforcement “more targeted.”

While Miner indicated that data analytics are being utilized across the DOJ’s white collar enforcement efforts, he pointed to the healthcare industry and financial sector as two such targets of the DOJ’s data-driven enforcement approach.  The DOJ has already successfully used Medicare claims data to identify fraud.  That success is attributed, in part, to the DOJ’s healthcare data analytics team which analyzes the Centers for Medicare and Medicaid Services’ payment database for health care fraud activity and trends.  The financial sector—specifically the commodities and securities arena—represents an expanding “area of focus” for the DOJ’s data-driven enforcement.  Miner indicated that the DOJ uses trading data to identify indicators or anomalies that are suggestive of market manipulation and other fraudulent activity.
Continue Reading DOJ Leveraging Data Analytics To Detect Fraud