Chat logs introduced as evidence by prosecutors at the Chicago spoofing trial of two former precious metals traders for Bank of America’s Merrill Lynch unit shows one of them, Edward Bases, bragging about how easy it is to manipulate prices.
On January 28, 2009, when Bases was working at Deutsche Bank AG, he put out bids to buy 2,740 gold futures contracts valued at around $244 million over the course of four-and-a-half minutes, according to Maria Garibotti, a vice president at Analysis Group who studied exchange and trading data for prosecutors. More than 98% were canceled without being filled, she said.
On the opposite side of the market, a fellow Deutsche Bank trader Bases coordinated with sold his 170 contracts worth $15,172,500 as the price rose, Garibotti told jurors on Wednesday.
BASES AND FELLOW MERRILL LYNCH TRADER JOHN PACILIO FACE FEDERAL FRAUD CHARGES FOR ALLEGEDLY SPOOFING THE FUTURES MARKET FROM 2008 TO 2014
“That does show u how easy it is to manipulate it sometimes,” Bases wrote minutes after the trading in a chat message sent to the other Deutsche Bank trader, Cedric Chanu, according to Garibotti. Chanu and another Deutsche Bank Trader, James Vorley, were sentenced last month to a year in prison each for their convictions in 2020 on spoofing charges at a separate trial.
“I f..k the mkt around a lot,” Bases said in another message.
Bases and fellow Merrill Lynch trader John Pacilio face federal fraud charges for allegedly spoofing the futures market from 2008 to 2014.
Another episode described by Garibotti involved trades by Bases and Pacilio on Aug. 9, 2010, when both were working at Merrill Lynch.
That day, Bases placed an iceberg order to buy 10 contracts of platinum, with six being filled at placement, she said. Less than 10 seconds after Bases placed that buy order, Pacilio placed an order to sell 205 contracts for $15,856,750, which was almost 90% of what was visible on the exchange order book, Garibotti said. The price went down, and the rest of Bases’ order was filled, she said. Less than a second later, Pacilio’s sell order was canceled, she said.
Garibotti said employees at Analysis Group put in about 3,000 hours studying data in this case over the course of several years, billing the government $1.2 million for its work.
The defense attorneys have not yet begun cross-examining Garibotti.
In opening arguments Tuesday, Bases’ defense attorney told the jury that once her client understood spoofing was illegal, he stopped doing it, and that nearly all the conduct the government identified was before the enactment of the Dodd-Frank Act, which specifically prohibited spoofing.