Michael Coscia filed papers in a US federal court in Chicago last week to have his indictment for spoofing dismissed as a matter of law. In October 2014, Mr. Coscia was indicted for spoofing and commodities fraud related to trading activities from August to October 2011 in 17 different CME Group contracts, and three ICE Futures Europe contracts. In his court papers, Mr. Coscia claimed that the prohibition against spoofing in federal law is “hopelessly vague, and its criminal enforcement would violate [his] right to due process of law.” Among his other arguments, Mr. Coscia noted that only after more than 18 months following his alleged wrongful conduct did the Commodity Futures Trading Commission issue a final interpretive guidance regarding the nature of conduct that might constitute prohibited spoofing. The delay, claimed Mr. Coscia, reflected public debate and even some CFTC’s commissioners’ acknowledgement that the definition of spoofing was unclear and could, on its face, prohibit legitimate conduct. As a result, Mr. Coscia said his indictment should be dismissed because “[b]asic principles of due process … do not permit a statute to sweep in a broad swath of conduct without a standard for separating the lawful from the unlawful.” (Click here to see details regarding Mr. Coscia’s indictment in the article “NJ-Based Trader Previously Sanctioned by UK FCA, CFTC and CME Indicted in Chicago for Same Spoofing Offenses,” in the September 29 to October 3 and 6, 2014 edition of Bridging the Week.)
My View: It was an unusual experience to review Mr. Coscia’s memorandum of law to support his motion to dismiss, and find my own public writings and statements referenced three times—particularly one writing from January 2011 where I warned that the “lack of clarity is particularly troubling since certain violations [of the anti-spoofing provision of law] could potentially result in criminal action.” Then, as now, I believe that “bidding or offering with the intent to cancel the bid or offer before execution” (the statutory definition of spoofing) might be wrongful under certain circumstances, but under other circumstances has another name other than spoofing—it’s called ordinary, legitimate trading!