Edward Bases and John Pacilio, former Merrill Lynch traders that were criminally charged with wire and commodities fraud for alleged spoofing activities earlier this year, sought to dismiss their indictments in a federal court in Illinois. The defendants argued that their alleged spoofing did not involve a material misrepresentation that “falsely and fraudulently represented to market participants that [they] were willing to trade [orders] when, in fact, they were not” as charged by the Department of Justice. This is because, claimed the defendants, all their open-market orders were real and genuine, as any counterparty could have accepted them, and the defendants would have performed on their executed trades. Moreover, claimed the defendants, Congress’s decision to create separate offenses for spoofing and manipulation and fraud as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act evidenced its view that spoofing is not a form of fraud. (Click here to compare 7 U.S.C. § 6(c)(a)(5)(C), dealing with spoofing with 7 U.S.C. § 9(1) (click here), dealing with manipulative or deceptive devices; click here for background on Mr. Bases’s and Pacilio’s initial indictment in the article “CFTC Names Four Banking Organization Companies, a Trading Software Design Company and Six Individuals in Spoofing-Related Cases; the Same Six Individuals Criminally Charged Plus Two More” in the February 4, 2018 edition of Bridging the Week.)