Ex-Deutsche Bank trader gets year in prison in spoofing case

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REUTERS/Andrew Kelly
  • Judge said prison time needed to deter financial misconduct
  • DoJ called for more than four years
  • Defendant asked for supervised release

(Reuters) - A Chicago federal judge sentenced a former Deutsche Bank AG trader to a year and one day in prison on Monday on fraud charges for manipulative trading in precious metals futures, saying the scheme undermined confidence in the markets.

U.S. District Judge John Tharp Jr said that the sentence for James Vorley, 41, of the UK was warranted to broadly deter other traders at banks from manipulative conduct.

"Everyone who works in the financial markets has to be reminded and understand that attempts to manipulate the market by any means will expose them to substantial criminal sanctions," Tharp said.

Vorley spoke briefly during the hearing, thanking the judge for his work on the case and expressing regret for the hardship the case has caused his family.

The sentence was a milestone for the U.S. Department of Justice's Criminal Division's prosecution of the commodities manipulation tactic known as "spoofing." A DOJ spokesperson confirmed that it was the second prison sentence to be imposed in a spoofing case.

Vorley, who worked in London for Deutsche Bank from 2007 to 2015, was convicted on three counts of wire fraud in September.

Prosecutors said at trial that Vorley and his former colleague Cedric Chanu defrauded market participants by placing and then cancelling decoy orders to move commodities prices between 2008 and 2013.

Chanu, of France and the United Arab Emirates, was convicted on seven counts of wire fraud and is scheduled to be sentenced on June 28.

At Vorley's sentencing, Avi Perry, assistant chief of the Criminal Division's Fraud Section, argued for a sentence of four years and nine months, saying the sentence was needed to deter others and restore faith in the markets.

"The conduct here perpetuates the perception and unfortunately, the reality, that our markets are unfair," he said.

Roger Burlingame of Dechert advocated for Vorley to be sentenced to supervised release, pointing out that the convictions related to trading episodes before the Dodd-Frank Act's anti-spoofing provision came into effect in mid-2011. Vorley was acquitted on five other fraud counts.

He also said that the trades were made in full view of Deutsche Bank's compliance staff, and nobody "ever bothered to mention" them as problematic.

Tharp rejected the idea that Vorley strayed unknowingly into criminal conduct, saying the jury found he intended to cheat counterparties by luring them with orders he had no intent to fill.

"That is fraud. That line isn't blurry or new, it has been there for 100 years," the judge said.

Tharp acknowledged that Vorley traded for the bank, not his own profit, and said the bank did a "poor job" of training and supervising its traders.

In 2018, Deutsche Bank paid $30 million to settle with the U.S. Commodity Futures Trading Commission over alleged spoofing. The bank neither admitted nor denied the allegations.

At the end of a hearing that ran for nearly three hours, Tharp said the decision to impose prison on Vorley, who is the primary caretaker for his two young children, had been "very difficult."

"I take no joy in imposing this sentence," he said.

Two former Merrill Lynch traders are scheduled to go to trial in July, and three individuals accused of spoofing at JPMorgan Chase & Co will stand trial on similar charges in October.

The case is United States v. Vorley, U.S. District Court for the Northern District of Illinois, No. 18-cr-00035.

For Vorley: Roger Burlingame and Matthew Mazur of Dechert

For the government: Avi Perry, Leslie Garthwaite and Brian Young of the U.S. Department of Justice's Fraud Section

Read more:

Two ex-Deutsche Bank traders convicted in U.S. over fake orders

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Jody Godoy reports on banking and securities law. Reach her at jody.godoy@thomsonreuters.com