Michael Coscia once swapped commodities in the sweaty trenches of a bustling New York trading pit.
But four years ago, the feds say the 53-year-old Brooklyn native came up with a money-making scheme he could only pull off hiding quietly behind a computer screen. And it netted him $1.4 million in less than three months.
“It’s called spoofing,” Assistant U.S. Attorney Sunil Harjani told a federal jury Tuesday. “And it’s illegal.”
By the end of the day, that jury found Coscia guilty on all counts in a first-of-its-kind case brought under the anti-spoofing provision added by the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. It took jurors roughly an hour to reach their landmark verdict. Coscia stormed out of the courthouse without commenting.
“We’re disappointed by the verdict. We believe this case presents many novel and complex issues, and Mr. Coscia intends to pursue all of his legal options,” Coscia’s lawyers said in written statement.
Harjani and Assistant U.S. Attorney Renato Mariotti spent more than a week convincing the jury that Coscia illegally disrupted the financial markets with fraudulent orders that existed only for hundreds of milliseconds — the blink of an eye — but were designed to artificially move the markets in his favor.
Defense attorneys claim Coscia stood behind those orders.
“There was no illusion, because the orders were real,” said Karen Seymour, a member of Coscia’s defense team.
The trial in the courtroom of U.S. District Judge Harry Leinenweber kicked off early last week. U.S. Attorney Zachary Fardon appeared in the courtroom for portions of Tuesday’s closing arguments, which lasted most of the day, and the reading of the verdict. Jurors had begun deliberating late Tuesday afternoon.
The feds charged Coscia last fall with six counts of commodities fraud and six counts of “spoofing.” Coscia, the owner of Panther Energy Trading LLC, allegedly had computer programs designed to carry out his scheme. Hoping to buy certain futures contracts, the feds say Coscia would flood the market with fraudulent orders to sell those contracts, and vice versa.
Because the orders were placed anonymously, prosecutors said it would appear as if Coscia’s orders came from multiple traders.
The maneuver artificially affected the price in Coscia’s favor, prosecutors said. Meanwhile, Coscia allegedly pre-programmed his fraudulent orders to last only hundreds of milliseconds and cancel immediately if any of them were even partially filled.
“It was a gimmick,” Harjani said. “It was a trick. It was a scam.”
But Seymour said Coscia acted in good faith, broke no laws and executed large trade orders more than 8,000 times.
Seymour also listed 15 reasons jurors should doubt Coscia’s guilt. She noted among them that large orders are lawful, that Coscia’s orders were tradeable, and that Coscia filled large orders more often than other high-frequency traders.
And, she said, “Michael is a stand-up guy.”