Wire Fraud-Spoofing

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7^th Circuit Court of Appeals

Case Name: United States of America v. Edward Bases

Case No.: 23-1530

Officials: Brennan, St. Eve, and Jackson-Akiwumi, Circuit Judges.

Focus: Wire Fraud-Spoofing

Pacilio and Bases were both senior traders at the precious metals trading desk of Bank of America. Between 2010 and 2011, as well as at various points before and after that time, they participated in “spoofing” activities to manipulate the prices of precious metals through an electronic trading platform. This platform allowed traders to place buy or sell orders for specific numbers of futures contracts at predetermined prices. It was assumed that each order was legitimate and placed with the intent to execute a transaction.

Spoofing involved the placement of a typically substantial order on one side of the market, with the genuine intention to trade, alongside a spoof order on the other side. This spoof order was fully visible but not meant to be executed. Its purpose was to influence the market price in a way that would benefit the genuine order, ultimately allowing the trader to obtain the desired price. The spoof order was canceled before it could be filled.

Pacilio and Bases raised constitutional challenges against their convictions for wire fraud affecting a financial institution and other related charges. They also contested the sufficiency of the evidence and certain evidentiary rulings related to testimonies concerning the Exchange’s and the bank’s policies against spoofing, which supported the government’s implied misrepresentation theory. The Seventh Circuit upheld their convictions, concluding that the defendants had ample prior knowledge that their spoofing activities were prohibited by law.

Affirmed.

Decided 10/23/23

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