Commodities Market
Manipulation Defense
Scott Armstrong served as an Assistant Chief in DOJ’s Market Integrity and Major Frauds Unit, the national leader in prosecuting fraud and manipulation in U.S. commodity markets. Drew Bradylyons served as Chief of Financial Crimes at the Eastern District of Virginia. They now defend traders, firms, and financial institutions facing spoofing, manipulation, and commodities fraud charges in federal courts nationwide.
Scott Armstrong served for nearly a decade at the Criminal Division’s Fraud Section, including as an Assistant Chief in the Market Integrity and Major Frauds Unit. That unit is DOJ’s national leader in prosecuting fraud and manipulation in U.S. commodity and financial markets. It has prosecuted spoofing and manipulation cases against traders and institutions at every major Wall Street bank. Scott tried 16 federal jury trials at DOJ. He understands how the government builds commodities manipulation cases because he built them. He now uses that knowledge to defend against them.
Precious Metals Spoofing Trial
Scott Armstrong tried a multi-week precious metals spoofing case in the Northern District of Illinois (Chicago) involving senior traders at Deutsche Bank, Bank of America, and Morgan Stanley. The government alleged that the traders systematically placed large orders on the COMEX and NYMEX exchanges that they never intended to fill in order to push precious metals prices in favorable directions. The case was charged as wire fraud affecting a financial institution under 18 U.S.C. § 1343 and commodities fraud under 18 U.S.C. § 1348. The trial required presenting complex trading data, order book analysis, and expert testimony on market microstructure to a federal jury. That experience gives Scott a detailed understanding of how the government presents manipulation evidence at trial and where that evidence is vulnerable to challenge.
First Cryptocurrency Market Manipulation Trial
Scott Armstrong also tried the first cryptocurrency market manipulation case in federal court while serving at DOJ’s Fraud Section. That case involved over $300 million in spoof and wash trades on a U.S. exchange. The spoofing techniques at issue were the same techniques the government targets in traditional commodity markets. The playbook is identical: trading data, communications evidence, pattern analysis, and expert testimony. Scott knows that playbook from the inside.
Drew Bradylyons — Parallel Proceedings & Financial Crimes
Drew Bradylyons served as Chief of the Financial Crimes and Public Corruption Unit at the U.S. Attorney’s Office for the Eastern District of Virginia, one of the most active federal prosecution offices in the country. At EDVA, Drew supervised complex financial fraud cases and coordinated parallel criminal and civil enforcement matters. Commodities manipulation cases almost always generate parallel CFTC civil enforcement actions alongside criminal charges. Drew’s experience navigating that dynamic protects clients from making a misstep in one proceeding that becomes a liability in the other. Drew previously served at DOJ’s Fraud Section, where he supervised complex financial fraud investigations and prosecutions nationwide.
Commodities market manipulation is a core federal enforcement priority. DOJ’s Fraud Section and U.S. Attorney’s Offices prosecute spoofing, manipulation, and fraud in the commodity futures and derivatives markets. The CFTC brings parallel civil enforcement actions. These cases target traders, trading firms, and financial institutions operating on the CME Group exchanges and other designated contract markets.
The enforcement pipeline is deep. DOJ’s Fraud Section has prosecuted spoofing cases against traders at JPMorgan Chase, Deutsche Bank, Bank of America, Morgan Stanley, Merrill Lynch, and other major financial institutions. The JPMorgan spoofing case resulted in a $920 million CFTC penalty, the largest in the agency’s history, alongside a DOJ deferred prosecution agreement. Individual traders have been convicted at trial, pleaded guilty, and received federal prison sentences. These cases reflect a sustained enforcement posture that shows no sign of diminishing.
The Dodd-Frank Act added an express anti-spoofing provision to the Commodity Exchange Act in 2010. Since then, DOJ and the CFTC have brought dozens of spoofing and manipulation cases targeting conduct on the COMEX, NYMEX, CBOT, and other CME Group exchanges. The government charges these cases under the anti-spoofing statute, the wire fraud statute, and the commodities fraud statute. Wire fraud carries up to 20 years in prison per count. Wire fraud affecting a financial institution carries up to 30 years. Commodities fraud carries up to 25 years. Individuals facing these charges need defense counsel who have tried these exact cases in federal court.
Spoofing
Spoofing is the practice of placing bids or offers with the intent to cancel them before execution. The Commodity Exchange Act (7 U.S.C. § 6c(a)(5)(C)) defines spoofing as bidding or offering with the intent to cancel the bid or offer before execution. The statute does not require that the order actually be cancelled. It requires proof that the trader intended to cancel at the time the order was placed. Spoofed orders are typically large relative to the order book and are placed on one side of the market to create the appearance of buying or selling pressure. That pressure moves the best bid or offer, and the spoofer profits by executing genuine orders on the opposite side at the artificially moved price. DOJ charges spoofing in commodity markets under the wire fraud statute, the commodities fraud statute, and the anti-spoofing provision of the CEA itself.
Layering
Layering is a form of spoofing in which a trader places multiple orders at different price levels on one side of the order book to create the illusion of depth and momentum. The stacked orders are not intended to be filled. They are designed to pressure the market price toward the trader’s genuine order on the opposite side. DOJ and the CFTC treat layering as a variation of spoofing and charge it under the same statutes. Layering cases often involve sophisticated order-entry algorithms and require expert testimony on order book dynamics and market microstructure to prove at trial.
Wash Trading
Wash trading is the execution of transactions in which there is no genuine change in beneficial ownership of the commodity position. The same individual or coordinated group controls both sides of the trade. The Commodity Exchange Act (7 U.S.C. § 6c(a)(2)) expressly prohibits wash sales in regulated commodity markets. The purpose is to generate artificial trading volume that misleads other market participants about the actual level of interest in a particular contract. The government proves wash trading through exchange records, account ownership data, and communications evidence showing coordination between the accounts on both sides of the trades.
Price Manipulation
Price manipulation under 7 U.S.C. § 9(1) and CFTC Rule 180.1 prohibits the use of any manipulative or deceptive device or contrivance in connection with a commodity transaction. The government must prove that the defendant acted with the specific intent to create an artificial price and that the defendant’s conduct caused an artificial price. Price manipulation cases in commodity markets involve trading strategies designed to move benchmark settlement prices, corner or squeeze a market, or create artificial prices in physical or derivatives markets. These cases are among the most complex in federal white-collar enforcement.
Benchmark Manipulation
Benchmark manipulation involves trading activity designed to influence settlement prices, fixing prices, or other reference rates used to value commodity positions and derivatives. Traders who execute large volumes of trades during settlement windows to move the benchmark price in a direction that benefits their existing positions face criminal and civil liability. The government charges benchmark manipulation under the CEA, the wire fraud statute, and the commodities fraud statute. CFTC parallel civil enforcement actions frequently accompany criminal charges in benchmark cases.
Front-Running and Misuse of Customer Order Information
Front-running occurs when a trader executes orders for their own account ahead of pending customer orders, trading on the knowledge that the customer order will move the market. This conduct violates the Commodity Exchange Act, exchange rules, and federal fraud statutes. DOJ and the CFTC have brought criminal and civil cases against traders and brokers who misuse material non-public information about customer order flow. Front-running cases require proof that the trader had access to customer order information and traded ahead of it for personal benefit.
Intent is the central battleground in every commodities manipulation case. The government must prove that the defendant acted with the specific intent to defraud or manipulate. Trading data alone rarely establishes that element. Prosecutors rely on two additional categories of evidence to bridge the gap between trading activity and wrongful intent: cooperator testimony and contemporaneous communications.
Cooperator Testimony
Federal prosecutors build manipulation cases from the inside out. They identify co-conspirators, colleagues, or counterparties and flip them into cooperating witnesses. Cooperators provide testimony about the defendant’s knowledge, intent, and instructions. They explain how trading strategies were designed, who directed them, and what the participants understood about the purpose of the trades. Cooperator testimony is powerful because it puts a human voice on conduct that would otherwise appear as raw data. It is also inherently vulnerable. Cooperators testify under cooperation agreements that give them powerful incentives to testify in a way favorable to the government. Effective cross-examination of cooperators is one of the most important skills in a manipulation trial.
Institutional Communications
The government subpoenas and seizes communications from institutional platforms that log and archive messages. Bloomberg Terminal chat, internal Slack channels, Microsoft Teams messages, and recorded phone lines are primary sources. These platforms retain messages indefinitely under firm compliance and recordkeeping policies. In the precious metals spoofing cases, electronic chat messages between traders on institutional platforms provided some of the most damaging evidence at trial. Traders discussed their spoofing strategies in real time, described how to manipulate the order book, and taught colleagues how to replicate their techniques. The government treats these messages as direct evidence of intent.
Personal and Encrypted Messaging
Commodities manipulation investigations increasingly involve evidence from personal and encrypted messaging platforms. Telegram, Signal, WhatsApp, and personal email accounts are examined when traders use personal devices to discuss trading activity. Federal investigators obtain this evidence through search warrants for devices and cloud accounts, through cooperating witnesses who preserved messages, and through platform-level legal process where available. The use of personal or encrypted channels to discuss trading activity can itself become evidence of consciousness of guilt. Prosecutors argue that the deliberate avoidance of firm-monitored communication systems reflects an awareness that the activity was unlawful.
Defense counsel must understand these evidence streams and how to challenge them. Scott Armstrong presented communications evidence at trial in his market manipulation cases at DOJ. He knows how the government selects, sequences, and presents chat messages and cooperator testimony to construct a narrative of intent. He now uses that knowledge to deconstruct the government’s narrative and expose the weaknesses in its proof.
Challenging Intent
Commodities manipulation requires proof of intent to defraud or manipulate. Legitimate trading activity can produce patterns that resemble spoofing or manipulation. The defense challenges the government’s characterization of trading activity by presenting evidence of genuine economic purpose, market-making obligations, hedging strategies, and risk management practices that explain the trading patterns the government relies on.
Trading Data Analysis
Manipulation cases are built on trading data. The government relies on exchange records, order books, time-and-sales data, and audit trail information to reconstruct trading activity and attribute it to specific individuals. The defense retains forensic trading experts to independently analyze the same data, identify weaknesses in the government’s analysis, and present alternative explanations for the trading patterns at issue. Fill rates, order duration, and order-to-trade ratios are common battlegrounds.
Market Microstructure
The government uses expert testimony on market microstructure to explain how spoofing and manipulation affect order book dynamics and price formation. The defense challenges these experts by demonstrating that the trading activity was consistent with legitimate market-making, hedging, or execution strategies. Defense experts in market microstructure can rebut the government’s theory that the defendant’s orders were designed to manipulate rather than to trade.
Communications Context
The government presents trader communications selectively to construct a narrative of intent. Isolated chat messages and recorded phone calls can appear damaging out of context. The defense examines the full communications record to demonstrate that the government’s selected excerpts misrepresent the trader’s intent, omit exculpatory context, or reflect industry jargon and trading bravado rather than admissions of manipulation.
Commodities manipulation cases almost always involve parallel proceedings. DOJ brings criminal charges. The CFTC brings civil enforcement actions for the same conduct. Both proceedings can run simultaneously. Statements made in one proceeding can be used in the other. This creates extreme risk for individuals who do not have counsel experienced in navigating parallel tracks.
The CFTC brings civil claims under the Commodity Exchange Act seeking disgorgement, civil monetary penalties, trading bans, and injunctive relief. CFTC penalties in manipulation cases can reach hundreds of millions of dollars. A civil judgment for the CFTC can also create collateral estoppel issues that strengthen DOJ’s criminal case. Additionally, CME Group and other self-regulatory organizations conduct their own investigations and impose sanctions that can affect a trader’s ability to trade on regulated exchanges.
Drew Bradylyons served as Chief of the Financial Crimes and Public Corruption Unit at the U.S. Attorney’s Office for the Eastern District of Virginia. At EDVA, Drew coordinated parallel criminal and civil enforcement matters and understands firsthand how DOJ and federal regulatory agencies share information, align strategy, and pursue individuals across parallel proceedings. That experience is critical in commodities manipulation cases, where a misstep in one proceeding can be devastating in the other.
Scott Armstrong supervised and prosecuted commodities manipulation cases at DOJ’s Fraud Section alongside parallel CFTC enforcement actions. He understands how the government coordinates across agencies and how to defend against the specific risks that parallel proceedings create. Together, Scott and Drew protect clients across every front of a commodities manipulation investigation.
Scott Armstrong tried commodities manipulation cases as a federal prosecutor at DOJ’s Fraud Section. He tried a multi-week precious metals spoofing case in the Northern District of Illinois (Chicago) involving senior traders at three major Wall Street banks. He also tried the first cryptocurrency market manipulation case in the Southern District of Florida (Miami) involving over $300 million in spoofed trades. He knows how the government builds these cases from the inside. He knows how to take them apart.
Scott served as an Assistant Chief in the Fraud Section’s Market Integrity and Major Frauds Unit, DOJ’s national leader in prosecuting fraud and manipulation in U.S. commodity and financial markets. He supervised manipulation investigations and prosecutions in precious metals, energy, and financial futures markets. He tried 16 federal jury trials. That trial experience is rare. It matters.
Drew Bradylyons served as Chief of the Financial Crimes and Public Corruption Unit at the U.S. Attorney’s Office for the Eastern District of Virginia. Drew supervised complex financial fraud cases and coordinated parallel criminal and civil enforcement actions. His experience navigating multi-agency investigations and parallel proceedings is directly relevant to commodities manipulation cases, where DOJ and the CFTC routinely pursue the same individual simultaneously.
Armstrong & Bradylyons PLLC defends traders, trading firms, and financial institutions facing commodities market manipulation charges in federal courts nationwide, including the Northern District of Illinois, the Southern District of New York, the District of Connecticut, the Eastern District of Virginia, the District of New Jersey, and every other federal district where these cases are prosecuted. The firm also handles cryptocurrency market manipulation defense and broader white-collar defense matters.
What Is Commodities Market Manipulation?
Commodities market manipulation is the use of deceptive trading practices to artificially influence prices, volumes, or market conditions in commodity futures and derivatives markets. The most common forms include spoofing, layering, wash trading, benchmark manipulation, and front-running. Federal prosecutors charge commodities manipulation under the wire fraud statute (18 U.S.C. § 1343), the commodities fraud statute (18 U.S.C. § 1348), and the anti-spoofing provision of the Commodity Exchange Act (7 U.S.C. § 6c(a)(5)(C)).
The penalties are severe. Wire fraud carries up to 20 years in prison per count. Wire fraud affecting a financial institution carries up to 30 years. Commodities fraud carries up to 25 years.
What Is Spoofing in Commodity Futures Markets?
Spoofing is bidding or offering with the intent to cancel before execution. The Commodity Exchange Act (7 U.S.C. § 6c(a)(5)(C)) defines the offense by the trader’s intent at the time the order is placed, not whether the order is ultimately cancelled. Spoofed orders are typically large relative to the order book and are placed to create artificial buying or selling pressure that moves the best bid or offer. The spoofer profits by executing genuine orders on the opposite side at the artificially moved price.
Scott Armstrong tried a precious metals spoofing case in the Northern District of Illinois (Chicago) involving senior traders at Deutsche Bank, Bank of America, and Morgan Stanley. He also tried the first cryptocurrency market manipulation case in the Southern District of Florida (Miami) involving over $300 million in spoofed trades.
What Markets Are Targeted in Federal Spoofing Prosecutions?
DOJ and the CFTC have prosecuted spoofing and manipulation in precious metals futures (gold, silver, platinum, palladium) on the COMEX, U.S. Treasury futures and interest rate products on the CBOT, energy futures (crude oil, natural gas) on the NYMEX, E-mini S&P 500 and E-mini Nasdaq 100 equity index futures, agricultural commodity futures, and cryptocurrency futures and derivatives. Any product traded on a designated contract market is subject to the anti-spoofing provision and federal fraud statutes.
What Federal Charges Apply to Commodities Manipulation?
Commodities manipulation can be charged under multiple federal statutes. The most common charges include wire fraud under 18 U.S.C. § 1343, wire fraud conspiracy under 18 U.S.C. § 1349, commodities fraud under 18 U.S.C. § 1348, spoofing under 7 U.S.C. § 6c(a)(5)(C), manipulation under 7 U.S.C. § 9(1), and conspiracy under 18 U.S.C. § 371.
DOJ increasingly prefers wire fraud and commodities fraud charges over standalone CEA violations because wire fraud carries higher maximum sentences and does not require proof of an artificial price.
What Should I Do If I Am Under Investigation for Commodities Manipulation?
Retain experienced federal defense counsel immediately. Do not speak with federal agents, respond to a grand jury subpoena, or make any statements to your employer’s internal counsel without your own independent legal representation. The most consequential decisions in a manipulation investigation happen before charges are filed. Early intervention by experienced counsel can shape the trajectory of the case, protect against self-incrimination, and in some cases prevent charges from being filed at all.
Common signs that you may be under investigation include receiving a grand jury subpoena, receiving a target letter, learning that the CFTC has issued subpoenas to your employer, being contacted by FBI agents or CFTC investigators, or learning that a colleague has retained defense counsel or is cooperating with the government.
What Sentencing Exposure Do I Face in a Spoofing or Commodities Manipulation Case?
Sentencing exposure in commodities manipulation cases depends on the charges and the U.S. Sentencing Guidelines calculation. Wire fraud carries a statutory maximum of 20 years per count. Wire fraud affecting a financial institution carries 30 years. Commodities fraud carries 25 years. The actual guideline range is driven primarily by the loss calculation under U.S.S.G. § 2B1.1, with potential enhancements for sophisticated means, number of victims, and role in the offense.
Loss calculation is one of the most contested issues at sentencing. The government calculates loss broadly, often including trades beyond the specific counts of conviction. The defense challenges the government’s loss methodology, argues for a narrower loss figure, and presents mitigating factors including cooperation, remedial measures, and the absence of actual victim losses. In several high-profile spoofing cases, federal probation offices have recommended significantly lower sentences than the government sought. Experienced defense counsel can make a material difference in the guideline calculation and the ultimate sentence.
What Defenses Are Available in a Commodities Manipulation Case?
The available defenses depend on the specific charges and facts. Common defenses include the following.
Lack of intent. The government must prove that the defendant intended to manipulate the market. Legitimate trading activity, market-making obligations, and hedging can produce patterns that resemble spoofing. Challenging the government’s inference of intent is frequently the most effective defense.
Fill rate evidence. If a significant percentage of the challenged orders were filled, the inference of spoofing weakens. Genuine orders are filled. Spoofed orders are not.
Trading data analysis. Independent expert analysis of order book data, fill rates, order duration, and order-to-trade ratios can undermine the government’s pattern evidence and demonstrate that the trading activity had a legitimate economic purpose.
Communications context. Trader communications taken out of context can appear damaging. The full communications record often demonstrates that the government’s selected excerpts misrepresent the trader’s intent.
Can My Employer’s Internal Investigation Be Used Against Me?
Yes. Statements made to your employer’s internal counsel or compliance team during an internal investigation can be disclosed to the government. Many financial institutions cooperate with DOJ and the CFTC by sharing the results of internal investigations, including employee interview memoranda, trading data analysis, and communications evidence. This cooperation can earn the institution credit under DOJ’s cooperation guidelines and the CFTC’s cooperation framework.
If your employer is conducting an internal investigation related to trading activity on your desk, you should retain your own independent defense counsel before participating in any internal interviews. Your employer’s counsel represents the institution. They do not represent you.
What Is the CFTC’s Role in Commodities Manipulation Cases?
The CFTC’s Division of Enforcement investigates and prosecutes civil violations of the Commodity Exchange Act, including spoofing, manipulation, wash trading, and fraud. The CFTC brings parallel civil enforcement actions alongside DOJ criminal cases. CFTC penalties in manipulation cases can include disgorgement, civil monetary penalties reaching hundreds of millions of dollars, trading bans, and injunctive relief. The CFTC also operates a whistleblower program that provides financial incentives to individuals who report potential CEA violations.
Why Does Trial Experience Matter in a Commodities Manipulation Defense?
Commodities manipulation cases are data-intensive, technically complex, and difficult for juries to understand. The government presents trading data, order book reconstructions, audit trail evidence, and expert testimony on market microstructure. Defending against this evidence requires counsel who have tried these cases and know how to cross-examine government experts, challenge data analysis, and present complex trading evidence to a jury in a clear and persuasive way.
Scott Armstrong has tried 16 federal jury trials, including a precious metals spoofing case in the Northern District of Illinois (Chicago) and the first cryptocurrency manipulation case in the Southern District of Florida (Miami). That level of trial experience in market manipulation cases is rare among defense attorneys.
Does Armstrong & Bradylyons Handle Commodities Manipulation Cases Nationwide?
Yes. Armstrong & Bradylyons PLLC defends traders, trading firms, and financial institutions facing commodities market manipulation charges in federal courts across the country. The firm obtains pro hac vice admission in any federal district where a client faces charges or investigation.
Commodities manipulation cases are concentrated in the Northern District of Illinois (Chicago), the Southern District of New York, the District of Connecticut, the Eastern District of Virginia, the District of New Jersey, and the District of Columbia. Scott Armstrong and Drew Bradylyons have tried cases and handled investigations in federal courts across the country. The firm also handles cryptocurrency market manipulation defense and broader white-collar defense matters nationwide.