(Reuters) - A U.S. appeals court on Monday upheld the conviction of a former New Jersey-based high-speed trader who was found guilty in the first U.S. criminal trial involving the manipulative trading practice known as spoofing.
The 7th U.S. Circuit Court of Appeals in Chicago rejected the appeal of Michael Coscia, who was sentenced in 2016 to three years in prison after a federal jury found the owner of New Jersey-based Panther Energy Trading guilty of commodities fraud and spoofing.
Spoofing involves placing bids to buy or offers to sell futures contracts with the intent to cancel them before execution. By creating an illusion of demand, spoofers can influence prices to benefit their market positions.
The case has been closely watched as Coscia was the first person to be criminally prosecuted under an anti-spoofing provision implemented as part of the 2010 Dodd-Frank financial reform.
The three-judge panel rejected arguments by Coscia’s lawyers that the anti-spoofing statute was unconstitutionally vague and argued that the evidence prosecutors submitted at trial was insufficient to support his conviction.
“The anti‐spoofing provision provides clear notice and does not allow for arbitrary enforcement,” U.S. Circuit Judge Kenneth Ripple wrote. “Consequently, it is not unconstitutionally vague.”
A lawyer for Coscia, 55, did not respond to a request for comment.
Federal prosecutors in Chicago accused Coscia of using computer algorithms to quickly place large orders he never intended to execute into markets run by CME Group Inc and Intercontinental Exchange Inc.
They said he engaged in spoofing of various markets for commodities, including gold, soybean oil and high-grade copper, which allowed him to make $1.4 million in less than three months in 2011.
Coscia denied wrongdoing. He is currently incarcerated at a medium-security prison in New Jersey.
The case is U.S. v. Coscia, 7th U.S. Circuit Court of Appeals, No. 16-3017.
Reporting by Nate Raymond in Boston; Editing by Lisa Shumaker