Andre Flotron, 54, dressed in a gray suit and maroon patterned tie, appeared unfazed as Assistant U.S. Attorney Avi Perry delivered an opening statement describing how Flotron and his underlings allegedly placed "trick" buy and sell orders to move market prices in favorable directions, rip off other precious metals investors and make big bucks for themselves and their bank.
"They called it a spoof, but call it what you want, it was a fraud," Perry told jurors.
But Marc Mukasey, an attorney for Flotron, contended in his opening statement that prosecutors are trying to manufacture a case against his client, comparing their supposed "bending, shaping and twisting" of the facts to the malleability of gold, the underlying commodity for many of the futures contracts that Flotron traded.
"This case is a 24-karat mistake," Mukasey said, arguing that the government is cherry-picking trading data and advancing "tarnished" testimony from other ex-UBS colleagues who are out to save their own skins by cooperating with prosecutors.
Flotron is facing one count of conspiracy to commit commodities fraud at his trial for allegedly plotting with others to enrich themselves and UBS through a roughly five-year spoofing scheme starting in 2008, while he was working on the Swiss bank's precious metals trading desk in Stamford, Conn.
Spoofing is a trading tactic outlawed by the Dodd-Frank Act that involves the use of allegedly deceptive bids or offers to feign the appearance of supply or demand and the government has sifted through mountains of old market data to identify several hundred trading episodes that it believes show spoofing by Flotron.
According to the government, Flotron would place a small buy or sell order close to the prevailing market price for a particular precious metal futures contract on the Commodity Exchange Inc., or COMEX, and then place a much larger order on the opposite side of the market, ultimately canceling this larger opposing order seconds later after at least part of his original order was executed.
This process, which Perry shorthanded for jurors Monday as "order, trick, fill, kill," lasted on average less than 17 seconds and was aimed at taking advantage of much faster algorithmic traders, the government said.
But defense counsel sought to humanize Flotron in contrast to these alleged algo-victims, describing him as a conservative, old-school trader who "traded with heart" and made investment decisions by looking at countless pieces of incoming information through the lenses of his own experience and intuitions.
If Flotron placed an order and then canceled it, that wasn't fraud but rather the normal byproduct of a human trader constantly being pressed to make snap judgments about where the market was headed, Mukasey argued.
Jurors additionally heard Monday from Jonathan Luca, the Federal Bureau of Investigation special agent who arrested Flotron last year and who drew on his own experience as a former metals trader to give the jury a crash-course in what the futures market is and how it works.
Lisa Pinheiro, a consultant for the government, also testified about her firm Analysis Group's analysis of trade data that prosecutors are using in their case against Flotron, whose attorneys pushed back on cross-examination about alleged shortcomings in the analysis and its interpretation.
The trial will resume Tuesday with testimony from Kar-Hoe "Mike" Chan, a cooperating witness and former junior trader at UBS who claims Flotron taught him how to spoof.
The government is represented by Avi M. Perry, Robert Zink, Michael J. Rinaldi and Matthew F. Sullivan of the U.S. Department of Justice.
Flotron is represented by Marc L. Mukasey, Nathan J. Muyskens and Daniel P. Filor of Greenberg Traurig LLP.
The case is U.S. v. Flotron, case number 3:17-cr-00220, in the U.S. District Court for the District of Connecticut.
--Editing by Pamela Wilkinson.
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