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Harry Cassin
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First convicted spoofer jailed three years

In the first federal criminal prosecution of its kind, a high-frequency trader was sentenced Wednesday to three years in prison for disrupting commodity futures prices in a $1.4 million fraud scheme.

Michael Coscia, 54, used an automated trading technique known as spoofing to earn illegal profits from orders he placed through Chicago-based CME Group and London-based ICE Futures Europe. 

The indictment against Coscia was the first federal prosecution under the anti-spoofing law.

Traders spoof by placing fake orders to trick others into trading at inflated or depressed prices.

The Dodd-Frank Act outlawed spoofing by amending Section 4c(a)(5) of the Commodities Exchange Act (7 U.S. Code §6c),

The statute makes it unlawful to engage in any practice “known to the trade as, ‘spoofing’ (bidding or offering with the intent to cancel the bid or offer before execution).” Our emphasis.

The Commodity Futures Trading Commission (CFTC) has said improper reasons for placing bids or offers and cancelling them include: overloading the quotation system, delaying another’s trade execution, creating the appearance of false market depth, or creating artificial price movements.

Coscia lives in Rumson, New Jersey. He commissioned the design of algorithms to create spoof trading activity at his New Jersey trading firm, the DOJ said.

A federal jury in Chicago last year convicted him on six counts of commodities fraud and six counts of spoofing. 

Federal judge Harry Leinenweber imposed the 36-month sentence in federal court Wednesday.

Coscia had argued that the intent to cancel language in the anti-spoofing statute was void for vagueness. But the district court didn’t agree.

In October last year, the SEC brought civil charges against a New York-based trading firm and one of its co-founders for spoofing.

Briargate Trading LLP and co-founder Eric Oscher paid more than $1 million to settle the charges. The SEC resolved the case through an internal administrative order and didn’t go to court.

Evidence at Coscia’s seven-day trial in November 2015 showed that he spoofed in the markets of various commodities, including gold, soybean meal, soybean oil, high-grade copper, Euro FX, and Pounds FX currency futures. 

In less than three months in 2011, Coscia made nearly $1.4 million from the spoofing, the DOJ said.


Richard L. Cassin is the publisher and editor of the FCPA Blog. He’ll be the keynote speaker at the FCPA Blog NYC Conference 2016.

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