High Frequency Trader Sentenced In First Criminal "Spoofing" Case

On July 13, 2016, an Illinois federal judge sentenced Michael Coscia, a New Jersey commodities trader, to three years in prison under a law prohibiting "spoofing," which was added to the Commodity Exchange Act ("CEA") by the 2010 Dodd-Frank Act. The sentencing followed a jury trial, the result of which was Coscia's conviction on six counts of spoofing and six counts of commodities fraud in November 2015. The presiding judge had previously rejected Coscia's challenge of the spoofing law, including arguments that the statute was unconstitutionally vague. 

Coscia was the first person prosecuted under the law, and his October 2014 indictment came as a shock to the futures industry. Coscia's indictment alleged that he "devised, implemented, and executed a high-frequency trading strategy in which he entered large-volume orders that he intended to immediately cancel before they could be filled by other traders." The indictment also alleged that Coscia "create[d] a false