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CHICAGO (BLOOMBERG) – Former Deutsche Bank commodity trader David Liew told a Chicago jury that he learned how to manipulate gold and silver prices from the two successful senior traders he admired and with whom he who worked for about three years.
Liew said he wanted to be a team player and earn money after joining the bank’s Singapore office, so he started doing “fake” trades like Cedric Chanu and James Vorley taught him. Senior traders often placed buy and sell orders they never intended to execute, a strategy meant to sway prices so they could make illegal profits, Liew said.
Vorley and Chanu are on trial for fraud and conspiracy, accused of issuing multiple false business orders between 2008 and 2013. The case is the latest prosecution of “spoofing” operations brought by the US, which has been taking action. strong against the practice ever since. – Called “flash crash” a decade ago.
“I saw Mr. Vorley and Mr. Chanu do it,” said Liew, a graduate of the London School of Economics and star witness for the prosecution, on Wednesday (September 16) in US federal court.
Liew, who has pleaded guilty to falsifying charges and is cooperating with the government in exchange for leniency, said he sat next to Chanu in Singapore from 2009 to 2012 and communicated daily in a live video chat with Vorley in London.
Although he knew price manipulation was wrong, Liew said spoofing operations were “so common” in the market and among his coworkers that he thought it was okay.
In one of the several operations that Liew described in detail, he worked with Vorley on August 26, 2010 to boost gold prices.
Liew said he placed an order to sell 15 futures contracts, valued at around $ 1.8 million based on prices at the time, while Vorley placed an order to buy 80 contracts, which would have been worth around $ 9, 9 million dollars. When prices rose, Vorley canceled his buy order and Liew executed his sell order, Liew said.
Vorley and Chanu used to help Liew with his spam operations, he said. If they saw that you had an open sell order, they would place a buy order to help you get a better price, exhibits presented at the test fair. This coordinated spoofing could also be performed by a lone trader placing orders on each side of the market.
Liew became so familiar with spam that he could tell when his colleagues were doing it. One day, he realized that Chanu was conducting such an operation and Liew sent him a message saying, “Be careful … don’t let buy orders enter the market,” according to a chat log Liew’s testimony.
Vorley and Chanu argue that their actions were legal and that canceling orders is an accepted deception strategy in the competitive world of high-frequency trading, where computers use algorithms to execute massive trades in milliseconds. None of the dealers’ actions were flagged by Deutsche Bank’s compliance department, defense attorneys said Tuesday.
Since anti-phishing laws were passed under the Dodd-Frank financial reforms in 2010, US federal prosecutors have stepped up criminal cases and the US Commodity Futures Trading Commission. Initiated more civil complaints
INTENT TO ASK
During cross-examination, defense attorneys tried to debunk the claim that Chanu and Vorley intentionally canceled the transactions. Liew acknowledged that there could be all kinds of situations that would result in a cancellation, even if the merchant goes to lunch or to the bathroom.
“There is no button that says what the intention is,” defense attorney Matthew Mazur said as he questioned Liew.
On Thursday, Liew acknowledged during his testimony that he had illegally coordinated transactions with a friend, Michael Chan, who was a gold trader in the Singapore office of another bank. Some of the transactions were conducted at the expense of his colleagues at Deutsche Bank, Liew said.
It was those exchanges with Chan that initially caught the attention of federal prosecutors, Liew said. Chan testified at the trial of UBS trader Andre Flotron, describing how Flotron had taught him to conduct bogus trades. Flotron was acquitted in 2018 after a federal judge in Connecticut dismissed most of the charges saying the government should have handled the case in Chicago, where the trade occurred.
Mazure also noted that Liew must have been aware that his own price manipulation strategies were not legal. In a chat message sent to Chanu on August 8, 2010, Liew wrote: “Because Dodd Frank is going to get me fired, ha ha,” according to a transcript of the conversation shown to jurors.
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