by Ronan Manly, BullionStar:
‘Beginning in at least May 2008 and continuing through at least July 2013 (the “Relevant Period”), Defendants James Vorley (“Vorley”) and Cedric Chanu (“Chanu”) engaged in a manipulative and deceptive scheme (the “Scheme”) while placing orders and trading in the precious metals futures markets on a registered entity.’
So begins the civil enforcement action filed by the Commodity Futures Trading Commission (CFTC) on 26 January 2018 against two former Deutsche Bank precious metals traders James Vorley and Cedric Chanu. During their trading careers at Deutsche, Vorley was employed by Deutsche Bank in London and Chanu by Deutsche Bank in Singapore.
According to the UK’s FSA Register, James Vorley performed regulated activities (i.e. trading) at Deutsche Bank London between June 2007 and November 2014. Before that, Vorley was employed in a similar role at the Bank of Nova Scotia between December 2001 and April 2007.
According to the CFTC complaint:
“Vorley and Chanu repeatedly engaged in manipulative or deceptive acts and practices by spoofing (bidding or offering with the intent to cancel the bid or offer before execution).
On numerous occasions, Vorley and/or Chanu placed orders for COMEX gold, silver, platinum or palladium futures contracts that they wanted to get filled (Genuine Order) and entered orders for the same contract on the opposite side of the market that they intended to cancel before execution (Spoof Order).”
The CFTC complaint continues:
“Vorley and Chanu also engaged in spoofing in coordination with other traders on the precious metals desk and taught another trader on the desk how to spoof.”
This other trader that they tutored is David Liew, also of Deutsche Bank in Singapore, who has now turned prosecution witness for the US Department of Justice (DoJ) and Federal Bureau of Investigations (FBI) – see below.
Department of Justice – Criminal Charges
Following the CFTC charges in January 2018, the US DoJ and FBI then charged the same James Vorley and Cedric Chanu in a separate criminal indictment on 25 July 2018, “with one count of conspiracy to commit wire fraud affecting a financial institution and one count of wire fraud affecting a financial institution.”
This DoJ indictment “alleges that Vorley and Chanu, who were employed as traders at Deutsche Bank AG engaged in a years-long conspiracy to defraud other traders on the Commodity Exchange Inc. (COMEX), which was an exchange run by the Chicago Mercantile Exchange Group (CME Group).”
According to the DoJ indictment, Vorley “worked from in or around May 2007 until in or around March 2015 as a trader at Deutsche Bank AG, where he traded precious metals futures contracts. VORLEY was based in London, United Kingdom”.
As well as devising a scheme to defraud other market participants, the DoJ alleges that Vorley transmitted wire communications to the COMEX from outside the US for the purpose of executing the scheme (i.e. sent fraudulent futures orders from London to the COMEX). In addition to Vorley and Chanu, the DoJ indictment also lists Deutsche Bank’s David Liew as a defendant, albeit a minor defendant as he turned prosecution witness.
Note that when the US government brought the criminal indictment and charge against Vorley and Chanu, this put the CFTC action on hold, which in legal language is described as the Department of Justice moving to stay the civil case due to the parallel criminal prosecution. This is done so that the defendants “cannot use civil discovery process to circumvent the limitations on criminal discovery”.
Fast forward to August this year, and Chicago federal judge John Tharp recently ruled that Vorley and Chanu can be prosecuted for ‘spoofing’ under the wire fraud statute. This then allowed the DoJ criminal case against Vorley and Chanu to proceed.