U.S. Department of Justice Convicts Two Connecticut Men in Multi-Year Commodities Market Manipulation Scheme

A federal jury has convicted Edward Bases and John Pacilio for engaging in a multi-year scheme to manipulate U.S. commodities markets for publicly traded precious metals futures contracts. The scheme involved placing large "spoof" orders in the precious metals futures markets that the defendants did not intend to fill, in order to manipulate prices for their own gain and the banks' gain, and to defraud other traders on the Commodity Exchange Inc. (COMEX) and the New York Mercantile Exchange Inc. (NYMEX).

Key Takeaways:

• The defendants, Edward Bases and John Pacilio, fraudulently manipulated U.S. commodities markets for publicly traded precious metals futures contracts over a period of several years.
• Bases and Pacilio placed large "spoof" orders in the precious metals futures markets that they did not intend to fill in order to manipulate prices and defraud other traders.
• The scheme involved the teaching of other traders how to engage in the practice of spoofing, which involves placing orders on the exchange that, at the time they were placed, were not intended to be executed.
• Electronic chat messages introduced as evidence during trial demonstrated Bases' and Pacilio's knowledge of how to manipulate the markets and their intent to engage in fraud.
• The defendants' scheme resulted in other market participants being induced to trade at prices, quantities, and times that they otherwise would not have traded.
• Bases was convicted of conspiracy to commit wire fraud affecting a financial institution and wire fraud affecting a financial institution, while Pacilio was convicted of conspiracy to commit wire fraud affecting a financial institution, wire fraud affecting a financial institution, and commodities fraud.
• The maximum sentence for conspiracy to commit wire fraud and wire fraud affecting a financial institution is 30 years' imprisonment per count, while commodities fraud carries a maximum sentence of 25 years' imprisonment.

Statistics:

• Bases and Pacilio engaged in the scheme for several years, with evidence of their activities dating back to 2013.
• The defendants made approximately $3.5 million in profits through their manipulative activities.
• The FBI's New York Field Office investigated the case, with the Criminal Division's Fraud Section and the Market Integrity & Major Frauds Unit playing a pivotal role in the prosecution.

Sources:

• "Two Connecticut Men Convicted for Engaging in Multi-Year Commodities Market Manipulation Scheme." U.S. Department of Justice, August 5, 2021.