Case: 1:14-cr-00551 Document #: 67 Filed: 10/19/15 Page 1 of 9 PageID #:1049
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE NORTHERN DISTRICT OF ILLINOIS
`EASTERN DIVISION
`
`
`
`
`Case No. 14 CR 551
`
`Judge Harry D. Leinenweber
`
`
`
`
`
`MEMORANDUM OPINION AND ORDER
`Defendant Michael Coscia faces six counts of “spoofing”
`(bidding or offering with the intent to cancel before execution)
`under 7 U.S.C. § 6c(a)(5)(C) and six counts of commodities fraud
`under 18 U.S.C. § 1348. Before the Court are both parties’
`Motions in Limine [ECF Nos. 47 and 52]. For the reasons stated
`herein, the Government’s Motions are granted in part and denied
`in part, and Coscia’s Motions are granted in part, denied in
`part, and reserved in part.
`I. GOVERNMENT’S MOTIONS IN LIMINE
`
`The Government filed seven Motions in Limine, two of which
`Coscia opposes. The unopposed Motions (Nos. 1, 2, 4, 6, and 7)
`are granted.
`
`
`
`
`UNITED STATES OF AMERICA,
`
`
` Plaintiff,
`
`v.
`
`MICHAEL COSCIA,
`
`
` Defendants.
`
`
`
`
`
`
`
`
`
`
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE NORTHERN DISTRICT OF ILLINOIS
`EASTERN DIVISION
`
`
`
`
`Case No. 14 CR 551
`
`Judge Harry D. Leinenweber
`
`
`
`
`
`MEMORANDUM OPINION AND ORDER
`Defendant Michael Coscia faces six counts of “spoofing”
`(bidding or offering with the intent to cancel before execution)
`under 7 U.S.C. § 6c(a)(5)(C) and six counts of commodities fraud
`under 18 U.S.C. § 1348. Before the Court are both parties’
`Motions in Limine [ECF Nos. 47 and 52]. For the reasons stated
`herein, the Government’s Motions are granted in part and denied
`in part, and Coscia’s Motions are granted in part, denied in
`part, and reserved in part.
`I. GOVERNMENT’S MOTIONS IN LIMINE
`
`The Government filed seven Motions in Limine, two of which
`Coscia opposes. The unopposed Motions (Nos. 1, 2, 4, 6, and 7)
`are granted.
`
`
`
`
`UNITED STATES OF AMERICA,
`
`
` Plaintiff,
`
`v.
`
`MICHAEL COSCIA,
`
`
` Defendants.
`
`
`
`
`
`
`
`
`
`
`
`Case: 1:14-cr-00551 Document #: 67 Filed: 10/19/15 Page 2 of 9 PageID #:1050
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`A. Motion No. 3.
`
`In Motion No. 3, the Government seeks to exclude rules and
`regulations relating to spoofing from certain financial markets,
`the Commodities Futures Trading Commission (“CFTC”), and the
`Financial Conduct Authority. The Government argues that this
`evidence is irrelevant, confuses the issues, and presents
`questions of law that are not for the jury to decide.
`
`“It is a basic premise of our legal system that juries are
`the triers of fact only; it is for the judge, not the jury, to
`interpret the law.” United States v. Tokash, 282 F.3d 962, 968
`(7th Cir. 2002). Thus, industry rules and regulations that
`attempt to define spoofing for the jury are irrelevant and
`likely to cause confusion. Coscia has indicated that he does
`not intend to introduce such evidence at trial.
`
`However, Coscia does intend to offer evidence relating to
`certain rules and regulations to show that he did not act with
`the requisite intent to defraud or cancel orders before
`execution. Coscia notes that market rules did not prohibit
`certain aspects of his trading activity — for instance, they
`allowed the placement of disparate orders on both sides of the
`market, did not require orders to be left open for a minimum
`amount of time, and permitted large-volume orders up to a
`certain limit.
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`Case: 1:14-cr-00551 Document #: 67 Filed: 10/19/15 Page 3 of 9 PageID #:1051
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`At trial, Coscia is entitled to introduce “evidence of good
`
`faith or the absence of intent to defraud.” United States v.
`Warner, 498 F.3d 666, 691 (7th Cir. 2007). Certain rules and
`regulations may be relevant to show that Coscia’s conduct was
`consistent with permitted market behavior, and thus did not
`reflect intent to defraud or cancel orders prior to execution.
`Because Coscia may introduce certain rules and regulations for
`this purpose, the Government’s Third Motion in Limine is granted
`in part and denied in part.
`B. Motion No. 5.
`
`In Motion No. 5, the Government seeks to exclude evidence
`or argument that “victim traders” were responsible for Coscia’s
`conduct. It is well established that the “perpetrator of a
`fraud may not defend himself by blaming the victim for being
`duped,” United States v. Serfling, 504 F.3d 672, 679 (7th Cir.
`2007), and Coscia has stated that he has no intention of
`advancing a “blame-the-victim” defense.
`
`However, Coscia anticipates that the Government may
`introduce testimony from so-called “victim traders” to prove his
`intent to mislead them. If the Government does so, Coscia seeks
`to introduce evidence on cross-examination showing that “any
`alleged victims were not misled or defrauded,” and that they
`“got the benefit of their bargains.” (Def.’s Resp., ECF No. 57,
`at 6.)
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`Case: 1:14-cr-00551 Document #: 67 Filed: 10/19/15 Page 4 of 9 PageID #:1052
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`“[C]ourts have held repeatedly that loss is relevant in
`
`fraud cases to demonstrate a defendant’s knowledge or intent to
`commit fraud.” United States v. Munoz-Franco, 487 F.3d 25, 62
`(1st Cir. 2007); see also, United States v. Copple, 24 F.3d 535,
`545 (3d Cir. 1994) (“Proof that someone was victimized by the
`fraud [may be] evidence of the schemer’s intent.”). Thus, to
`the extent that the Government uses victim testimony to prove
`intent, Coscia may cross-examine witnesses about whether they
`were actually “misled or defrauded” or “got the benefit of their
`bargains.” The Government’s Fifth Motion in Limine is therefore
`granted in part and denied in part.
`II. COSCIA’S MOTIONS IN LIMINE
`Coscia has filed nine Motions in Limine. The unopposed
`
`motions (Nos. 3, 4, 6, and 9) are granted.
`A. Motion No. 7
`
`In Motion No. 7, Coscia seeks to exclude CME Group (“CME”)
`and ICE Futures Europe (“ICE”) witness testimony relating to
`complaints about his trading activity. The Court begins with
`Motion No. 7 because the complaints’ admissibility is an issue
`that arises in several of the Government’s responses.
`
`Coscia urges the Court to exclude the complaints because
`they are inadmissible hearsay, irrelevant, and prejudicial. The
`Government has indicated that it does not intend to offer the
`out-of-court statements of the complainants. Instead, the
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`Case: 1:14-cr-00551 Document #: 67 Filed: 10/19/15 Page 5 of 9 PageID #:1053
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`Government plans to introduce “the fact that market participants
`complained to [CME or ICE and] the fact that the complaints were
`received and linked back to Defendant.” (Gov’t Resp., ECF
`No. 58, at 5.) According to the Government, the fact that other
`traders viewed Coscia’s conduct as “so unusual and disruptive
`that they decided to report [it]” is probative of Coscia’s
`intent. (Id. at 6.)
`
`Although the fact that complaints were made is not hearsay,
`the Government has failed to show how the complaints are
`relevant. The Government insists that “[a]ll the jury will hear
`is that a witness made a complaint about a specific
`behavior . . . and that the exchange linked the activity . . .
`to the defendant.” (Id.) But the fact that traders complained
`about certain behavior to the exchanges does little, if
`anything, to prove Coscia’s intent. Moreover, introducing
`evidence of how other traders perceived Coscia’s activity poses
`a risk of unfair prejudice that substantially outweighs whatever
`probative value the complaints may have — jurors may conclude
`that Coscia’s activity was illegal because other traders found
`it unusual. Coscia’s Motion to exclude complaints regarding his
`trading activity is therefore granted.
`B. Motion No. 1
`
`In Motion No. 1, Coscia seeks to exclude evidence
`concerning regulatory investigations of his trading activity and
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`Case: 1:14-cr-00551 Document #: 67 Filed: 10/19/15 Page 6 of 9 PageID #:1054
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`related settlements. The Government does not intend to offer
`evidence regarding the settlements or certain investigations.
`However, the Government does aim to introduce evidence that CME
`and ICE investigated Coscia’s conduct based on the complaints
`mentioned above, and that CME and ICE linked the activity to
`Coscia through investigations. The Government argues that this
`evidence is relevant to show that “Coscia’s conduct was unusual
`and purposeful, not the result of ordinary, run-of-the-mill
`trading activity that was not intended to trick others.” (Id.
`at 2.)
`
`Under Rule 408(a)(1), evidence of “furnishing . . . a
`valuable consideration in compromising or attempting to
`compromise the claim” is not admissible to prove the validity of
`a disputed claim, and the parties agree that evidence of
`Coscia’s prior settlements should be excluded. In addition,
`because the Government has not shown how the complaints and
`follow-up investigations are relevant to Coscia’s intent to
`defraud others or cancel orders before execution, the Court
`finds that they too should be excluded. Coscia’s Motion to
`exclude evidence regarding prior investigations and settlements
`is therefore granted.
`
`C. Motion No. 2
`
`In Motion No. 2, Coscia seeks to exclude evidence related
`to market harm or disruption that is unconnected to his trading
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`Case: 1:14-cr-00551 Document #: 67 Filed: 10/19/15 Page 7 of 9 PageID #:1055
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`activity. It appears that the Government does not intend to
`offer evidence of unconnected market harm or disruption, and
`Coscia’s Motion is therefore granted to the extent that it seeks
`to exclude such evidence.
`
`Coscia urges the Court to “require the Government to offer
`proof of a direct causal connection to the trading
`activity . . . that is charged in the Indictment” before
`admitting any evidence of market harm or disruption that other
`traders observed. (Coscia Mem., ECF No. 48, at 6.) Here again,
`the Government reiterates that it plans to introduce complaints
`that CME and ICE linked to Coscia. The Court reserves ruling on
`the admissibility of such evidence until trial, when the
`Government will have the opportunity to show a direct connection
`to Coscia and the trading activity charged in the indictment.
`D. Motion No. 5.
`
`In Motion No. 5, Coscia seeks to exclude all references at
`trial to the term “manipulation.” Coscia argues that such
`references are (1) irrelevant because Coscia is not charged with
`“manipulation,” and (2) prejudicial.
`
`The Government does not intend to argue that Coscia engaged
`in “manipulation,” as that term is used in the Commodity
`Exchange Act, which makes it a crime “to manipulate or attempt
`to manipulate the price of any commodity in interstate
`commerce.” 7 U.S.C. § 13(a)(2). However, the Government does
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`Case: 1:14-cr-00551 Document #: 67 Filed: 10/19/15 Page 8 of 9 PageID #:1056
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`intend to use the term “manipulate” according to its common,
`everyday meaning — to control or influence in a clever or unfair
`way.
`
`The term “manipulation,” when used in the ordinary, non-
`legal sense that the Government describes, is not unfairly
`prejudicial. It carries neither the same inflammatory
`connotations as “tax haven,” “securities fraud,” or “insider
`trading,” nor the legal weight of “market manipulation” — terms
`that other courts excluded in the cases Coscia cites. See,
`Aristocrat Leisure Ltd. v. Deutsche Bank Trust Co. Americas,
`No. 04 CIV 10014 PKL, 2009 WL 3111766, at *7 (S.D.N.Y. Sept. 28,
`2009); Highland Capital Mgmt., L.P. v. Schneider, 551 F.Supp.2d
`173, 193 (S.D.N.Y. 2008). Coscia’s Motion to exclude references
`to “manipulation” is therefore denied.
`E. Motion No. 8.
`
`In Motion No. 8, Coscia seeks to exclude evidence of
`unrelated, post-indictment trading activity, including his use
`of an algorithmic trading program called “Ratio Trader” in
`November 2011.
`
`Although the Government agrees that Coscia’s Motion should
`be granted, it has indicated that it may introduce evidence of
`post-indictment trading activity if “the defense argues that
`defendant ceased his market activity independent of action by
`the exchanges or regulators.” (Gov’t Resp., ECF No. 58, at 7.)
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`Case: 1:14-cr-00551 Document #: 67 Filed: 10/19/15 Page 9 of 9 PageID #:1057
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`In general, Coscia’s post-indictment trading activity is
`
`both irrelevant and prejudicial. See, United States v. Boone,
`628 F.3d 927, 935 (7th Cir. 2010) (“[T]he definition of the
`scheme itself is a limiting principle, in that only evidence of
`the same scheme as opposed to a related or distinct scheme, is
`admissible.”). However, in the event that Coscia argues that he
`ceased his trading activity independent of any action by the
`exchanges or regulators, and the Government attempts to
`introduce evidence of post-indictment trading activity to refute
`this argument, the Court reserves ruling on the admissibility of
`such evidence until that issue arises at trial.
`III. CONCLUSION
`For the reasons stated herein, the Government’s Motions in
`
`Limine [ECF No. 52] are granted in part and denied in part.
`Coscia’s Motions in Limine [ECF No. 47] are granted in part,
`denied in part, and reserved in part.
`
`IT IS SO ORDERED.
`
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`Harry D. Leinenweber, Judge
`United States District Court
`
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`Dated: October 19, 2015
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