A former Deutsche Bank AG futures trader convicted of manipulating gold and silver prices was sentenced on 21 June to one year and one day in prison.
James Vorley, a 41-year-old UK citizen who started working at Deutsche Bank shortly after graduating from high school, was among the dozens of traders caught in a criminal and civil enforcement campaign to stamp out spoofing, a type of market manipulation banned by the 2010 Dodd Frank financial overhaul law.
Regulators and prosecutors say spoofing involves sending and then cancelling a flurry of orders that can mislead counterparties into thinking supply and demand have changed. The mirage, which some defence attorneys say is lawful bluffing, can lure others into making losing trades.
Vorley and another former Deutsche Bank trader, Cedric Chanu, were convicted in September after a jury trial in Chicago during the height of the coronavirus pandemic. The defendants, jurors, and attorneys all wore masks during the two-week proceeding.
US District Judge John J. Tharp Junior said he struggled with whether to order a prison term for Vorley, who he said posed no risk of recidivism, but found that his trading was clearly fraudulent. “A sentence with no prison term would, in the court’s view, substantially undermine the message that if you attempt to manipulate the market, the price you will pay includes prison,” Judge Tharp said.
Prosecutors urged a sentence of 57 months, while Vorley’s lawyers asked for time served.
The outcome marks the second time a trader has received a prison sentence for charges related to spoofing. Michael Coscia, a former proprietary trader, was sentenced in 2016 to three years in prison for creating a spoofing program that earned him about $1.4m.
Judge Tharp said he believed Coscia’s case “involved more extreme conduct than here.” While Coscia made money from what prosecutors called spoofing, Vorley didn’t directly benefit from his trading gains because the earnings went to Deutsche Bank.
Vorley’s trading caused losses to his counterparties of about $1.1m, Judge Tharp said.
Companies including Deutsche Bank, JPMorgan and Bank of America have collectively paid hundreds of millions of dollars in fines to resolve criminal and civil spoofing investigations. Two other traders, formerly employed by Bank of America, are due to face trial in July on charges related to spoofing.
Some critics of the government prosecutions say that bluffing tactics were accepted in financial markets for years. Enforcement efforts should stress regulatory, not criminal, punishments, they argue.
Vorley “learned how to trade by watching other, more experienced traders,” his lawyers wrote in a sentencing memorandum to the judge. “Bluffing and misdirection were commonplace tactics in the precious metals markets at the time.”
Some of Vorley’s former colleagues at Deutsche Bank wrote letters for his sentencing that he was an ethical employee who sought guidance from the bank’s compliance staff about trading rules. Family members wrote that imprisonment would harm his two children, because he is their primary caregiver while their mother works to support them.
Write to Dave Michaels at [email protected]
This article was published by Dow Jones Newswires