Accused Spoofer Beats CFTC Bid to Bar Trading Before Trialby
Commodities regulator accuses him of futures market cheating
3Red’s Oystacher faces January trial over spoofing allegations
Igor Oystacher can keep buying and selling commodities while he figures out how he might convince a jury he’s done nothing wrong.
Oystacher, of 3Red Trading LLC, avoided a ban on trading as he prepares for a Jan. 17 trial in a lawsuit brought by the U.S. Commodity Futures Trading Commission. U.S. District Judge Amy St. Eve in Chicago rejected the request by the CFTC, which accuses Oystacher of manipulating the market through spoofing.
The judge’s ruling Tuesday follows a hearing this spring in which the CFTC argued Oystacher continued what it called illegal trades even after it sued him. Oystacher is accused of using a bait-and-switch strategy that involves canceling large orders placed on one side of a transaction while profiting from smaller ones on the other. He has denied wrongdoing in the case.
The ruling comes the day before the first trader convicted of spoofing is scheduled to be sentenced in Chicago. Prosecutors are asking another federal judge to send Michael Coscia, who was the head of Panther Energy Trading LLC, to prison for as long as seven years and three months.
St. Eve said in her ruling that Oystacher is currently trading in only two markets -- futures based on the Standard & Poor’s 500 Stock index and U.S. 10-year Treasury bonds. She said Oystacher may continue trading only in those two markets before his trial has concluded.
In addition, Oytstacher’s compliance officer, who testified during the lengthy preliminary hearing, must file a sworn affidavit each month showing trading surveillance data from Oystacher’s 3Red Trading.
“It is unusual for a court to deny a federal agency’s motion for preliminary injunction, and the outcome here reflects how misguided the CFTC was in asking for one,” said Tom Becker, a spokesman for Oystacher and his firm. “We look forward to presenting our full case and demonstrating that the trades in question were in complete compliance with the law.”
A CFTC spokesman said the agency had no comment on the ruling.
The CFTC argued to St. Eve that her Chicago courtroom was the last line of defense to stop Oystacher after the markets where he trades failed to stop his alleged spoofing.
The court “cannot rely on the exchanges to stop Oystacher because the evidence has shown that despite their repeated inquiries, concerns, and discipline, exchanges have failed to prevent Oystacher’s continued misconduct,” the CFTC wrote in the 34th footnote to a May 16 court filing. “Multiple texts reveal 3Red’s strategy of attempting to leverage 3Red’s status as a major customer of the exchanges to protect Oystacher from market regulators within the exchanges.”
The case is U.S. Commodity Futures Trading Commission v. Oystacher, 15-cv-09196, U.S. District Court, Northern District of Illinois (Chicago).