(CHICAGO) A high-frequency trader was convicted in federal court Tuesday of disrupting commodity futures prices by “spoofing” in a $1.4 million fraud scheme.
New Jersey resident Michael Coscia, 53, commissioned the design of two computer programs in order to earn illegal profits from orders placed through Chicago-based CME Group and London-based ICE Futures Europe, according to a statement from the U.S. Attorney’s office.
He used these programs at his trading firm, Panther Energy Trading LLC, to commit a crime called spoofing, prosecutors said.
High-frequency trading is a form of automated trading that uses computer algorithms to placing a high volume of trading orders in in a short amount of time. Spoofing involves placing bids to buy or offers to sell a futures contract, rapidly canceling it, and then waiting to see how the market reacts to make a real bid or offer.
In less than three months in 2011, Coscia illegally profited nearly $1.4 million, prosecutors said. He used this technique in various markets, including gold, soybean meal, soybean oil, high-grade copper, Euro FX and Pounds FX currency futures.
Coscia’s indictment was the first federal prosecution in the country under the anti-spoofing provision added to the Commodity Exchange Act in 2010.
He was convicted on six counts of spoofing and six counts of commodities fraud. He faces a $1 million fine and a maximum sentence of 10 years for each count of spoofing and a $250,000 fine and 25 years for each count of fraud.
Coscia is scheduled to be sentenced in March 2016.
