Futures trader Michael Coscia has earned himself a footnote in books about financial crime and a cell in a federal prison for three years after becoming the first person ever convicted of "spoofing" in the US. Coscia, the 54-year-old chief of the Panther Energy Trading firm, was the first to end up in court after the 2010 Dodd-Frank financial overhaul banned spoofing, which involves using algorithms to place orders the trader has no intention of executing, the Wall Street Journal reports. The tactic is used to shift prices in the trader's favor, and prosecutors say it tripled Coscia's earnings of $150,000 a month in 2011, reports Reuters.
Prosecutors explained how Coscia manipulated prices in such markets as soybean meal, British pounds, and coppers, using an algorithm for high-frequency trading, Bloomberg reports. "It's hard to see why he was doing that other than greed," said US District Judge Harry Leinenweber in Chicago, who sentenced Coscia to two years less than prosecutors had sought. The trader plans to appeal the conviction but may still have to report to federal prison by Sept. 30. He has already paid a $3 million fine. Former prosecutor Renato Mariotti says that when the case first surfaced, many people thought the government wouldn't be able to prove its case. "I think that skepticism is gone," he says. "I think any trader who hears this sentence has to be thinking, 'I don't want to go to jail.'" (The SEC is trying to rein in high-frequency trading.)