United States v. Vorley

UNITED STATES OF AMERICA, Plaintiff, v. JAMES VORLEY and CEDRIC CHANU, Defendants.

No. 18 CR 00035

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

March 18, 2021

Judge John J. Tharp, Jr.

MEMORANDUM OPINION AND ORDER

James Vorley and Cedric Chanu were charged in a superseding indictment with conspiracy to commit wire fraud affecting a financial institution, in violation of 18 U.S.C. § 1349, and, collectively, sixteen substantive counts of wire fraud affecting a financial institution, in violation of 18 U.S.C. §§ 1343 and 2. See Superseding Indictment, ECF No. 127. Following a two-week jury trial, each defendant was found guilty on several substantive wire fraud counts—Vorley on three, and Chanu on seven—but acquitted as to the conspiracy and remaining wire fraud charges. Both defendants have moved for a judgment of acquittal or, in the alternative, a new trial. Their challenges range from insufficiency of the evidence, to the wire fraud statute's unconstitutionality as-applied in this case, to various errors in the jury instructions and evidentiary objections, to juror coercion during deliberations owing to the COVID-19 pandemic. The evidence was sufficient to support the jury's verdicts, however, and none of the defendants' arguments for a new trial are meritorious, so their Rule 29 and Rule 33 motions [350], [355], [354], and [361] are denied.

BACKGROUND

Defendants James Vorley and Cedric Chanu are former Deutsche Bank precious metals traders. Vorley worked in the Bank's London offices between May 2007 and March 2015; Chanu worked in both London (March 2008 to May 2011) and Singapore (May 2011 to December 2013). The superseding indictment¹ charged that from March 2008 through approximately June 2013, Vorley and Chanu knowingly and intentionally devised a scheme to defraud other precious metals futures traders on the Chicago Mercantile Exchange ("CME")'s Commodity Exchange, Inc. ("COMEX"). Superseding Indictment ¶ 1. Their alleged scheme involved placing so-called "Fraudulent Orders" or "spoof" orders in the COMEX order book via the electronic trading system "Globex"—these orders were wire communications for the purpose of the statute. Id. These orders were fraudulent, the government alleged, because the entry of an order on the exchange carries with it an implicit representation that the party placing the order intended for the order to be executed. The prosecution's theory was that Vorley and Chanu instead intended to cancel the trades before they were executed and, in doing so, aimed to create a false impression of supply and demand in the market and induce other traders to execute on the defendants' opposite-side "Primary Orders" at "prices, quantities, or times that they otherwise would not have." Id. ¶¶ 4-5, 21.

The government alleges the scheme worked as follows: if Vorley or Chanu wanted to buy gold futures at a price lower than the prevailing market price, he would place large spoof orders to sell gold futures at above-market prices; as other market participants reacted to the arrival of large sell orders, the prevailing price of the contract at issue would fall and the defendant's primary buy orders would be filled at an artificially low price. If Vorley or Chanu wanted to sell gold futures at a price above the market, on the other hand, he would place large, visible spoof orders on the buy side; the market would climb toward his primary sell order and that order would be filled at an artificially high price. In either scenario, the defendant would cancel the large spoof orders ifhis primary order was executed on or if the market got too close that he risked "getting given"—having an unwanted fill of the visible buy or sell order.² The defendants' primary orders generally were "iceberg" orders³ that revealed only a portion of the defendants' full trading interest to the market, while the "spoof" orders took the form of either a single, large visible order, often for one hundred contracts or more, or groups of visible ten-lot orders, layered at slightly different price points.

The government alleged that the defendants variously executed this scheme individually, together, and, at times, in coordination with other Deutsche Bank precious metals traders, including David Liew, who worked for the bank in Singapore from December 2009 until February 2012, pled guilty to participating in the scheme, and testified at trial. At the center of the prosecution's presentation at trial were sixty-one trading episodes—each of which, it alleged, involved at least one of the defendants placing "spoofing" orders on the opposite side of the market of a smaller "iceberg" order, on their own or in coordination with another Deutsche Bank trader, in order to fill the iceberg orders at a better price than the price at which the market had previously been trading.

Over the course of six days of evidence presentation, the jury heard from a variety of witnesses during the government's case: John Scheerer, a senior director in CME Group's Global Command Center; David Liew, the defendants' former Deutsche Bank colleague and alleged coconspirator in the charged conduct; Professor Kumar Venkataraman, a professor of finance atSouthern Methodist University and an expert on financial markets; Anand Twells, of Citadel Securities; Travis Varner, of Quantlab Financial; Michael Koplowitz, a Deutsche Bank compliance officer; Special Agent Jonathan Luca, the FBI case agent who led the FBI's investigation in this case and who is himself a former futures trader; Maria Garibotti, a consultant with Analysis Group, the group that designed the government's charts and performed the underlying analysis of the defendants' trading data; and Charles Graf, a graphics design professional who created one of the government's demonstrative exhibits. The defendants called no witnesses.

The trial took place in a courtroom modified to permit the observance of strict COVID-19 protocols. However, on the morning of September 22, the last day of evidence presentation, a juror was hospitalized with symptoms consistent with COVID-19.⁴ He was excused from jury service, and, with the agreement of the parties, the Court anonymously polled the remaining jurors to determine whether they would like an opportunity to consult that day with a medical professional about potential COVID-19 exposure. Two jurors indicated that they would like the opportunity to do so, while the remaining eleven responded that they did not need to consult with a medical professional and would like to proceed with the trial. Tr. 1997:23-1998:3; Tr. 2001:15-2002:1. The parties then stipulated to proceed with an eleven-member jury, and the two jurors who wanted to see a medical professional were excused. At the end of the government's case later that day, both defendants moved for a Rule 29 judgment of acquittal; those motions were taken under advisement. The case went to the jury in the late afternoon on September 22. After three days of deliberations, the jury returned their verdicts on September 25. Mr. Vorley was found guilty of Counts 2, 8, and 10, and Mr. Chanu was found guilty of Counts 3, 9, 11, 12, 14, 15, and 16. Thedefendants were found not guilty of the remaining charges, including the conspiracy charged in Count 1.

The defendants have now briefed Rule 29 and Rule 33 motions for judgments of acquittal or, alternatively, a new trial. See Defs.' Joint Rule 29 Mot., ECF No. 355; Chanu Suppl. Memo., ECF No. 356; Vorley Suppl. Memo., ECF No. 357; Defs.' Joint Rule 33 Mot., ECF No. 354; Defs.' Suppl. Rule 33 Mot., ECF No. 361. They argue that the evidence was insufficient as to each element of the substantive wire fraud offense for a rational jury to conclude, beyond a reasonable doubt, that the defendants were guilty of the charged conduct; that the defendants did not participate in a "scheme to defraud" as a matter of law; and that the wire fraud statute is unconstitutionally vague as applied to the defendants' conduct. They also allege various errors throughout the trial that, they argue, warrant a new trial, should the Court consider the government's evidence sufficient under the Rule 29 standard.

DISCUSSION

I. Rule 29 Motion for a Judgment of Acquittal

In considering a Rule 29 motion, this Court views the evidence in the light most favorable to the government, and the verdict will be overturned only if no rational trier of fact could have found beyond a reasonable doubt that the defendants committed the essential elements of the crime. See Jackson v. Virginia, 443 U.S. 307, 319 (1979); United States v. Genova, 333 F.3d 750, 757 (7th Cir. 2003) ("Rule 29(c) does not authorize the judge to play thirteenth juror."). After a jury's guilty verdict, a criminal defendant seeking a judgment of acquittal under Rule 29 faces a hurdle that the Seventh Circuit has deemed "nearly insurmountable." See United States v. Jones, 713 F.3d 336, 339 (7th Cir. 2013); see also United States v. Garcia, 919 F.3d 489, 497-98 (7th Cir. 2019) (observing that successful Rule 29 motions are "relatively rare" in modern federal practice); United States v. Weimert, 819 F.3d 351, 354 (7th Cir. 2016) ("Given our deference tojury determinations on evidentiary matters, we rarely reverse a conviction for mail or wire fraud due to insufficient evidence."). Nevertheless, because the government bears the burden of proof, the Rule 29 standard is not wholly insurmountable, and "the height of the hurdle depends directly on the strength of the government's evidence." Jones, 713 F.3d at 339. If the evidence is insufficient to sustain the conviction, this Court must grant a motion for judgment of acquittal. See id. at 339-40.

A. The Government Presented Sufficient Evidence for a Reasonable Jury to Convict Each Defendant of Wire Fraud Affecting a Financial Institution.

In challenging their convictions on the substantive wire fraud counts, the defendants maintain that the prosecution failed to...