United States v. Bases, No. 23-1530 (7th Cir. 2023)
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Pacilio and Bases were senior traders on the precious metals trading desk at Bank of America. While working together in 2010-2011, and at times separately before and after that period, they engaged in “spoofing” to manipulate the prices of precious metals using an electronic trading platform, that allows traders to place buy or sell orders on certain numbers of futures contracts at a set price. It is assumed that every order is bona fide and placed with “intent to transact.” Spoofing consists of placing a (typically) large order, on one side of the market with intent to trade, and placing a spoof order, fully visible but not intended to be traded, on the other side. The spoof order pushes the market price to benefit the other order, allowing the trader to get the desired price. The spoof order is canceled before it can be filled.
Pacilio and Bases challenged the constitutionality of their convictions for wire fraud affecting a financial institution and related charges, the sufficiency of the evidence, and evidentiary rulings relating to testimony about the Exchange’s and bank prohibitions on spoofing to support the government’s implied misrepresentation theory. The Seventh Circuit affirmed. The defendants had sufficient notice that their spoofing scheme was prohibited by law.
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