CFTC expert suitability under consideration in JPMorgan spoofing case
The Court is actively considering the CFTC expert disqualification motion in a lawsuit targeting former JPMorgan traders. This becomes clear from the latest filings with the Illinois Northern District Court.
There is a disagreement between the Department of Justice (DOJ) and former head of JPMorgan’s precious metals desk Michael Nowak over the expert witnesses in this spoofing case. In particular, Nowak is digging in his heels on hiring former CFTC advisor Jeremy Cusimano. The DOJ insists that there would be a conflict of interest if Nowak hires Cusimano. Nowak opposes such a claim.
First, let’s recall that back in 2019, the DOJ launched criminal proceedings against Nowak, Gregg Smith and Christopher Jordan. The indictment alleges that the defendants engaged in widespread spoofing, market manipulation and fraud while working at JPMorgan through the placement of orders they intended to cancel before execution in an effort to create liquidity and drive prices toward orders they wanted to execute on the opposite side of the market.
Now, the dispute has focused on the use of experts. The DOJ’s motion to disqualify Cusimano is based on a purported conflict of interest stemming from Cusimano’s participation in a separate investigation conducted by the CFTC during his tenure there nearly a decade ago (the so-called “Silver Investigation”).
In 2008, the CFTC began investigating complaints of long-term suppression of prices of silver futures by means of large open short positions. This conduct, according to Nowak, is unrelated to the alleged spoofing and barrier-running that are the basis for the charges in the present case. As part of its investigation, the CFTC interviewed dozens of individuals, including Nowak and Christopher Jordan for two days each in August and September 2010.
Nowak notes that only a few of the questions that were put to Nowak and Jordan related to the entry and cancellation of futures orders, the type of conduct principally at issue in the present case.
Nowak stresses that, if he elects to call Cusimano as an expert at trial, he does not intend to elicit from Cusimano any information about the CFTC Silver Investigation or about Cusimano’s participation in it, as those matters are unrelated to the subject matter of his anticipated testimony and unnecessary to establish his expertise.
Finally, Nowak explains that this is a complex and data-intensive case, and it calls for an expert with highly specialized knowledge and experience. Cusimano’s quantitative and analytical expertise is seen a exceptional in its scope and depth with respect to the relevant products and markets (precious-metals futures and options), trading strategies involving such products, risk- and portfolio-management practices associated with such products, the shifting market dynamics and regulatory landscape for such products over the lengthy alleged conspiracy period, and the range of substantive offenses alleged in this case (spoofing, attempted price manipulation, and fraud).
The latest Court filings, seen by FX News Group, show that the Court has yet to make up its mind on this matter. An entry before the Honorable Edmond E. Chang says that the Court has the pending motions under advisement, and in particular the Cusimano disqualification motion is under active consideration. The tracking status hearing is reset 05/07/2021 at 8:30 a.m., but to track the case only.