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N.D. Ill.: CFTC notes success against Illinois software development firm, remains silent regarding dismissal of all charges against its founder - 16 September 2020

After the failed criminal prosecution of Jitesh Thakkar for his involvement with spoofer and purported flash crash trader Navinder Sarao, a parallel CFTC case comes to an end with the entry of a consent order against Edge Financial and the charges dropped against Thakkar.

The often-acrimonious legal battle between the CFTC and software developer Jitesh Thakkar, and his company, Edge Financial Technologies, Inc. has come to end. The corporate defendant, Edge Financial, has become subject to a consent order of permanent injunction which includes findings, an order of disgorgement, and penalties totaling $72,600. Meanwhile, the CFTC’s claims against Thakkar were dismissed with prejudice (CFTC v. Thakkar September 14, 2020, A. Wood).

A legal odyssey comes to an end. Jitesh Thakkar was charged and tried criminally for aiding and abetting the spoofing activities of convicted felon, Navinder Sarao, the purported perpetrator of the infamous 2010 flash crash. Edge had provided software consulting services to Sarao while Thakkar was the company’s founder and president. In April 2019, a jury voted 10-2 to acquit Thakkar in connection with the software consulting services provided to Sarao. Rather than retry Thakkar, the DOJ dismissed the outstanding charges against him.

Thakkar and Edge were also charged in a parallel proceeding by the CFTC in January 2018. Both were charged with aiding and abetting Sarao’s wrongful conduct. Thakkar was also charged as Edge’s controlling person. The civil enforcement matter was stayed during the pendency of the criminal proceeding. In September 2019, the CFTC resumed its enforcement action against Thakkar with vigor with the CFTC seeking extensive discovery even though the agency had access to a massive trove of documents from the criminal matter. In January 2020, the CFTC and defendants informed the court they had agreed to settle the case.

The order against Edge. The consent order against Edge provides it aided and abetted Navinder Sarao’s (referred to as "Trader A" in the order) spoofing and the use of a manipulative and deceptive scheme involving the E-mini S&P futures contract, from at least January 30, 2013 through October 30, 2013. Additionally, the order found that Edge enabled Trader Sarao’s violations by programming a custom software application that helped send false supply and demand signals for E-mini S&P futures contracts and induced other market participants to react.

The court’s permanent injunction prohibits Edge from providing any computer programming services in connection with trading in CFTC-regulated markets for a period of two years. Further, it ordered disgorgement of $24,200 and the payment of a $48,400 civil monetary penalty, for a total of $72,600 in monetary relief.

The CFTC’s release. The Commission’s press release does not mention Jitesh Thakkar, nor the court’s dismissal of all of the CFTC’s charges against him, despite the central role he played at Edge and in the agency’s case. Rather, the CFTC Division of Enforcement Director James McDonald took the opportunity to observe "We cannot allow companies to profit from creating programs intended to help traders spoof and manipulate." Edge charged Sarao $24,200 for its programming services. Moreover, McDonald noted a willingness for the CFTC to bring similar cases in the future. He stated, "Establishing that entities can be held civilly liable for aiding and abetting such illegal conduct, as charged in this case of first impression, strengthens the CFTC’s enforcement mission. We will not hesitate to bring charges against entities and individuals for similar conduct in the future."

The case is No. 1:18-cv-00619.

 

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