(Bloomberg) -- Two former Deutsche Bank AG employees were charged with fraudulent and manipulative trading involving precious metals futures contracts through a practice known as spoofing as a federal probe on illegal market practices continues to widen.
James Vorley, 38, of the U.K., and Cedric Chanu, 39, of France and the United Arab Emirates, were indicted Tuesday for conspiracy and wire fraud by a grand jury in Chicago.
The two men are accused of engaging in a multiyear scheme to defraud other traders on the Commodity Exchange Inc., a venue run by the Chicago Mercantile Exchange Group. Prosecutors said they worked with another Deutsche Bank trader, David Liew, to place fraudulent orders that they didn’t intend to execute to create a false sense of supply and demand and induce other traders to enter into transactions they wouldn’t have otherwise made.
It wasn’t immediately clear if the defendants have been apprehended or intend to travel to the U.S. to face the charges. An attorney wasn’t listed for Chanu in court filings and a lawyer for Vorley didn’t immediately respond to a telephone message seeking comment.
Liew, who pleaded guilty to conspiring to manipulate futures contracts in precious metals in June 2017, has become a government witness for U.S. prosecutors probing whether traders at the world’s biggest banks conspired to manipulate prices in silver, gold, platinum and palladium.
Deutsche Bank, which wasn’t accused of wrongdoing in the cases against Liew, is one of nearly a dozen banks whose metals trading came under Justice Department scrutiny in early 2015. Investors have brought lawsuits against a handful of big banks, including Deutsche Bank, alleging manipulation of precious metals markets.
Deutsche Bank, HSBC Holdings Plc and UBS Group AG agreed in January to pay about $50 million to settle civil claims that they manipulated metals markets, and eight individuals, including Vorley and Chanu, were named.
Spoofing Is a Silly Name for Serious Market Rigging: QuickTake
Spoofing involves generating a flood of fake orders to fool other traders into thinking the market is poised to rise or fall. While there’s nothing wrong with canceling orders, the Dodd-Frank Act passed in 2010 makes it illegal to place orders with no intention of executing them. People familiar with the matter told Bloomberg News in January that the U.S. is also looking beyond precious-metals trading and planning more criminal spoofing charges against Wall Street traders.
A former UBS Group AG precious metals trader, Andre Flotron, was found not guilty in April by a federal grand jury in Connecticut of scheming to manipulate futures markets, in the first acquittal in a spoofing-related case since the U.S. outlawed the practice.
The case is U.S. V James Vorley, 18-cr-00035, U.S. District Court, Northern District of Illinois (Chicago)
--With assistance from Tom Schoenberg and Matthew Leising.
To contact the reporter on this story: Chris Dolmetsch in New York State Supreme Court in Manhattan at cdolmetsch@bloomberg.net
To contact the editors responsible for this story: David Glovin at dglovin@bloomberg.net, Paul Cox, Joe Schneider
©2018 Bloomberg L.P.
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