Trader Michael Coscia Sentenced To Prison For Three Years Under 'anti-spoofing' Law

Micheal  Coscia

In the outcome of a closely watched trial that could set precedent, convicted futures trader Michael Coscia was sentenced in federal court Wednesday to three years in prison and two years of supervised release for spoofing and commodities fraud.

Coscia, 54, of Rumson, N.J., was the first defendant in the country to stand trial under new anti-spoofing laws included in the 2010 Dodd-Frank Act. In November, he was found guilty of six counts of spoofing — the use of computer algorithms to rig markets in fractions of a second — and six counts of commodities fraud. Prosecutors had recommended five to seven years in prison, while the defense had sought probation.

Ultimately, U.S. District Judge Harry Leinenweber settled in the middle, citing Coscia's age and health, as well as the ambiguous amount of financial loss incurred by the victims.

Spoofing trial to shine light on secret world of high-frequency trading

"This is a very serious crime and it has serious consequences. ... (Coscia) has helped a lot of people over the years, not only family and friends, but also fellow traders. But he also engaged in spoofing and had no financial need to do so," Leinenweber said shortly before announcing the sentence.
Federal prosecutors were pleased with the outcome.

Read More: Newclime Boom Sales

"There was and has been this sort of suggestion throughout the course of this prosecution that this criminal case is somehow murky or unclear because of technology, because of the use of algorithms. Well, guess what? A lie is a lie. Deceit is deceit. ... The defendant cheated faceless victims out of money through deceit over the internet. Today's result and sentence, I think, is a reflection of that," U.S. Attorney Zachary Fardon said.

Assistant U.S. Attorney Sunil Harjani added that the sentence of imprisonment would send a message to traders in Chicago and throughout the U.S.

Coscia made about $1.4 million in only about two months by victimizing traders including those at Citadel, the Chicago financial services firm formed by billionaire Ken Griffin, when he manipulated the prices of futures contracts on the Chicago Mercantile Exchange, prosecutors have said.

Upon leaving the courtroom, Coscia declined to comment. He smiled as he hugged friends and family who had come to show support. During the hearing, he gave a brief statement asking for leniency and saying that he takes responsibility for his actions.

Stephen Senderowitz, Coscia's attorney, said he will file an appeal. During the hearing, Senderowitz emphasized that it's not clear how much money any individual trader lost because of Coscia's actions.

 That will be among the issues argued further during the appeal, during which the defense will also challenge the constitutionality of the spoofing law, he said afterward.
"It's the first criminal prosecution for spoofing. ... It's very important, and it's going to be very important going forward," Senderowitz said.

The Coscia case is "just the tip of the iceberg" in terms of the government's increasingly active role in such prosecutions, said Renato Mariotti, lead prosecutor on the case before recently joining a private practice.