Supreme Court, Jimmy Carole, Jordan Rubin discussed on Bloomberg Law

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This is Bloomberg law. A divided Supreme Court rejects a religious challenge. Charles little about the facts of the case. Peter views with prominent attorneys in Bloomberg legal experts. My guest is former federal prosecutor Jimmy Carole joining me as Bloomberg law reporter Jordan Rubin. And analysis of important legal issues, cases in headlines. The Supreme Court takes on state secrets multiple lawsuits were filed against the emergency rule. Is this lawsuit for real? Bloomberg law with June Grasso. From Bloomberg radio. Welcome to the Bloomberg law show, I'm June grosso, ahead in this hour. Why the Supreme Court's shadow docket is as ominous as it sounds. Trump electors are targeted in the Georgia criminal investigation. Elon Musk loses the first round in his legal battle with Twitter. And JPMorgan's former big hitters of the gold market are being tried for racketeering. Michael Novak was once the most powerful person in the goal market. Now he's on trial with two other former JPMorgan Chase employees for operating a criminal conspiracy inside one of Wall Street's largest banks, facing decades in prison. Prosecutors say a corrupt group of traders and sales staff manipulated gold and silver markets for the benefit of the bank and its prized clients, scamming the market for years with so called spoofing trades. Joining me is securities law expert James Cox, a professor at duke law school. Jim explain what spoofing is. Well, smooth thing is keep this on simple ground. Is submitting an order to buy in order to sell without the intent of really wanting to buy it or sell it at a price the order stated. And it's intended to lure the unsuspecting into thinking that the market is moving one direction or another. So the whole purpose of spoofing isn't to close an order. But rather to create the impression that prices are moving or likely to move in a certain direction because of a buildup of demand demand on the sales side or demand on the buy side. So all of this is the false order that's been sent to the marketplace. And a series of false orders to create an idea that there's like a surge of price, for example, let's assume that you said a whole bunch of false orders to buy. To create the image that there's a lot of demand out there at $10 and maybe the price will go up to ten ten and so therefore you should be wanting to go out and buy in the market at ten or ten O 5 with the expectation that both markets will suddenly go to ten ten. So you grow out in the market and you're willing to pay more than the current market price of ten because you think it's going to go up to ten O 5 and you close the ten O 5 and the market stays at ten. So you've gotten clipped. So the whole idea of spoofing is to dupe another person of believing that there's a shift in the marketplace. So now in this case, unlike past cases of alleged trading fraud, the prosecutors have sort of upped the ante here, they're accusing the defendants of a racketeering conspiracy. That's a law you usually see more with the mafia than banks. This is true. They're using the recall and other legislation that's been passed over the decades as designed to go after a purposeful intentional misconduct. We rarely see that used in most securities or commodities cases, but they're doing it in this case. And I believe the fact that we now find that certainly with this administration, when you look at who the U.S. attorneys are, who's at the SEC, who's at the commodity future trading commission, those are all now democratically controlled prosecutor offices and there has been the belief that the markets have gotten more and more corrupt through a variety of practices, not just spoofing, but spoofing is one of those processes where it's rampant. And what's interesting in the case is being prosecuted now is that part of the defense is the fact that look, I came in, our young broker here and I saw how things were working and people did this practice, which turns out to be spoofing, doing it all the time. And I just thought that was normal and routine processes and I had no corrupt criminal intent behind it. And the fact that that defense in this case has some salience to itself, where I think that that could be actually the key defense to this case is that everybody's doing it indicates that this is a pervasive problem, but it also explains why we're suddenly seeing spoofing cases being brought. And particularly this moving case being brought and the criminal arena, that is that this is not a question of just getting an injunction against somebody making them disgorge the commission so that they may have earned by spoofing or maybe even the gains that they made by spoofing. This is the perhaps put somebody away for some period of time in prison. And the reason for that is that the markets are filled with moving. Some of the prosecution's witnesses are former traders who are cooperating after pleading guilty, so would they be able to testify as to what the intent was. Yes, the important thing is to describe the phenomena. So the trier of fact can really understand why this is manipulative conduct and not legitimate business practices. So they would be explaining that as to explain the consequences of the misconduct. So the witnesses are doing that. And I think that they're also going to be helpful in describing the likely mental state of the defendant in this case. That is that brokers all knew that this conduct was illegal that was pervasively practiced and it was a way to make money and that there were victims not those who were practicing spoofing, but rather the other traders on the other side who are anti and were victimized by false appearances about market movements. So I think that all of that is important and the fact that they'd be able to get some other traders to cooperate while at the same time admitting that they had engaged in this conduct makes it more likely that the defendant in this case could be found guilty. According to the defense, evidence that the trial will show that the vast majority of all market orders are canceled and the typical lifespan of an order is just a couple of seconds. I think that

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