Two significant trials around the country telegraph our Government’s heightened interest in prosecuting market manipulation. One is the Robobank Libor case being tried in SDNY, where two ex-bankers were individually charged relating to the manipulation of Libor rates. Anthony Allen and Anthony Conti, both from the UK, were former bankers with Rabobank of the Netherlands. Both were charged with conspiracy and wire fraud relating to their influencing of Libor, short for London Interbank Offered Rate. Libor reflects interbank short-term loan rates based on submissions by a panel of banks. Libor doesn’t just affect loans between banks but also affects interest rates worldwide.
The trial has been ongoing for two weeks, and it just ended with both men being convicted Mr. Conti took the stand in his own defense, and Mr. Allen did not. The New York Times published an article about that choice and only missed the mark on one big important point; that it’s the Government’s burden to establish guilt. So regardless of the jury’s speculation, the decision NOT to testify is because one does not have to.
Many banks previously agreed to fines associated to manipulating Libor, but it is certainly a sobering reality that a jury has returned a conviction on individuals charged relating to the allegations. The evidence or theory in a corporate prosecution is rarely tested because institutions make a dollar and sense determination and often decide that it is not worth it to fight the Government. When an individual’s liberty is at stake, he or she so often doesn’t have the luxury of making a similar choice. It is hard to reconcile that individuals are left holding the bag while their corporate counterparts resolve allegations of criminal conduct with monetary settlements.
The other case that has received media attention concerns commodities trader, Michael Coscia, who was tried and just convicted in what has been reported to be the first “spoofing” case filed and tried since the 2010 Dodd Frank Act included anti-spoofing legislation. In April, the US Justice Department and the US Commodities Trading Commission brought another spoofing case against a London trader accused of a market manipulation that caused the 2010 “flash crash.” The charges filed against Coscia were based on the theory that he manipulated the prices on the Chicago Mercantile Exchange. The Government alleged that Coscia flooded the market with huge orders for future contracts that he never intended to execute and argued the repeated spoofs moved prices for a few thousandths of a second — just long enough for a computer program to capitalize and make a profit. His attorney argued that the client was simply a savvy trader; if companies lost money based on a miscalculation or misreading of the market, they should essentially be big boys about it and not complain. Unfortunately, Coscia was found guilty of all 12 counts of fraud.
These kinds of cases are tough and frightening at the same time, because one person’s fraud could be considered another person’s capitalizing on a business opportunity. So many factors go into market fluctuations, but now it seems our Government is getting in the business of playing Monday morning quarterback at the expense of criminalizing acts that might not fall properly within the realm of the mens rea needed to jail a person. Unfortunately, these two recent victories by the Government will likely cause us to see similar prosecutions in the future.