Chicago Rising to Become A New Home for Criminal and Civil Trials About High-Speed Trading and Spoof
As businesses evolve and change, the litigation industry often evolves and changes to confront criminal, regulatory and civil law issues arising from the businesses. That outcome apparently is at work in Chicago for both criminal law and civil law related to high-speed trading, a topic covered at length by Michael Lewis in Flash Boys.
As to criminal law, the US Attorney’s office in Chicago has created a task force focused on high-speed trading and spoofing in the commodities and securities industries. The task force already notched a notable win as it indicted and convicted a spoofing trader, with the jury taking less than an hour to return a guilty verdict. On the regulatory and civil sides, private companies working in the space are filing regulatory complaints about each other and filing civil lawsuits against each other. The changes are discussed in a Crain’s Chicago Business article of November 13, 2015. A couple of key excerpts are pasted below, but the full article is well worth reading:
“In addition, U.S. Attorney Zach Fardon has made policing the industry a priority. He built a team of a dozen prosecutors last year to focus solely on commodities and securities crimes, using new tools under Dodd-Frank to thwart disruptive trading practices in the electronic sphere.
We’ve got a U.S. attorney who’s not afraid to enforce this law,” he says later in an interview. The new aggressiveness includes surprise FBI visits to trading firms and the aid of new CFTC and Securities and Exchange Commission whistleblower programs created by Dodd-Frank, he says.
Meanwhile, trading firms are incriminating each other. Citadel filed multiple complaints with the CFTC and CME regarding anonymous trading that was traced to 3Red and Oystacher. One of Citadel’s employees provided an affidavit in the 3Red case last month, saying Citadel lost millions of dollars as a result of Oystacher’s actions. Chicago-based Citadel also complained about Panther’s trading, and another Citadel employee testified for the prosecution in Coscia’s trial.
High-speed firms are suing each other in Chicago federal court, too. HTG Capital Partners sued “John Doe” over spoofing and is trying to force CME to reveal the name of the culprit. Kemnitz is representing “John Doe” in the case but won’t discuss the matter.”