The U.S. attorney’s office is recommending futures trader Michael Coscia be sentenced to five to seven years in prison.
In November, Coscia, 54, was convicted on all 12 counts, six for fraud and six for “spoofing,” or the use of computer algorithms to rig markets in fractions of a second.
“This Court now has the opportunity to send a message, loud and clear, that our financial markets operate on principles of honesty and transparency, and do not allow a select few traders to profit in the trading markets through illegal bait and switch schemes at the expense of other traders,” U.S. Attorney Zachary Fardon wrote in a memo to the court this week.
Fardon’s recommendation is only a fraction of the total maximum sentence of 25 years for the fraud counts and a maximum of 10 years for the spoofing counts. Coscia has asked the court to give him probation.
Coscia, 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.
During the trial, prosecutors said Coscia victimized 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. They said Coscia netted $1.4 million in the scam in a little more than two months.
It is not clear how much money any individual trader lost because of Coscia’s actions. Coscia’s attorney said he was doing “just good trading” and called him a “market-maker who profited on the on the spread between buy and sell prices on the CME.”
Eric Hunsader, a Winnetka-based critic of high-frequency trading who received a $750,000 whistleblower award from the Securities and Exchange Commission in a case related to the practice, was audibly shocked when told that prosecutors were recommending prison time for Coscia.
“I don’t think you should get jail time, period,” he said.
The kind of fraud that Coscia committed, Hunsader said, is so common that it should be handled like speeding tickets. “In the electronic trading world, tickets should be automatically handed out just like red light cameras,” he said. “There should be no interpretation involved. It’s electronic. The rules should be crystal clear, and they are not. It’s subjective.”
Coscia’s sentencing hearing is scheduled for Wednesday.
crshropshire@tribpub.com
Twitter @corilyns
