The criminal complaint brought by the U.S. DOJ against currency traders marks another example of a “front running” case. In the complaint, prosecutors allege defendants used “information provided in confidence” by the victim company to purchase Sterling in advance of the transaction — “a scheme that is commonly referred to as ‘front running’” in breach of the duty of trust and confidence owed to the victim company.

To source the duty of confidentiality and trust, the complaint points to a confidentiality agreement executed by the bank. That agreement required information provided by the victim company be treated “strictly confidential.” It further provided that bank agreed to “use the Confidential Information solely for the purposes for which it is provided.” Notably, the complaint also points to pitch materials the bank provided to the victim company. All this, together with personal assurances given by bank personnel to the victim company (captured in calls and electronic messages), gave rise to the duty of trust and confidence, which allegedly was violated by the fx trading at issue.

This criminal complaint points out the growing importance of how confidential information is managed in contexts other than traditional securities insider trading. And how assurances in pitch materials can contribute to the creation of a duty that limits trading.

As pled, the complaint here over fx trading reflects many of the same concepts that underlay the CFTC’s insider trading case against Mr. Motazedi.

Our colleague Geoffrey Aronow, a Sidley partner and former Director of the CFTC’s Division of Enforcement, commented: “I would not be surprised to see more of these types of cases, both civil and criminal, as the CFTC continues to focus on the idea of fraud arising from the misuse of information obtain in a relationship of trust and confidence to trade in products under its jurisdiction.”