Government’s Futures Cop Departs After Leading Market-Manipulation Crackdown

WASHINGTON—The former prosecutor who conceived and oversaw the Justice Department’s effort to crack down on market manipulation in commodities and derivatives has resigned and joined the litigation firm Quinn Emanuel Urquhart & Sullivan LLP.

Robert Zink,

who left the department July 2, will now represent companies and individuals facing government investigations.

He was the architect of a campaign to criminally charge traders accused of using a manipulative tactic known as spoofing. Prosecutors have charged 20 traders with spoofing misconduct and settled criminal cases over spoofing with

JPMorgan Chase

& Co.,

Deutsche Bank AG

and

Bank of America Corp.

Another trial is set to begin Monday in Chicago federal court against two former Bank of America traders, Edward Bases and John Pacilio. The two are accused of spoofing precious-metals futures on exchanges operated by

CME Group Inc.

The trial, which could last three weeks, will involve debates over trading charts that purport to show the spoofing, as well as testimony from traders and expert witnesses interpreting whether the conduct was manipulative. Messrs. Bases and Pacilio have denied the government’s allegations.

Mr. Zink and the Justice Department fraud section doubled down on the campaign after losing their first spoofing trial in 2018 against a former UBS Group AG trader. The department prevailed at trial last year against two former Deutsche Bank precious-metals traders accused of spoofing. The defendants were sentenced last month to a year in prison.

Deutsche Bank precious-metals traders were successfully prosecuted in a spoofing case last year.



Photo:

Alex Kraus/Bloomberg News

Regulators and prosecutors say spoofing involves sending and canceling a flurry of orders intended to mislead traders into thinking supply and demand have changed. The mirage, which some defense attorneys argue is lawful bluffing, can cause counterparties to lose money by trading at artificially low or high prices.

Some defense lawyers and business groups say some Justice Department spoofing cases amount to prosecutorial overreach. In at least one case, some of the conduct predated a federal law that defined and outlawed spoofing. The department alleged the spoofing violated an antifraud law that had a longer statute of limitations. Prosecutors prevailed in the case.

Mr. Zink said it didn’t matter whether spoofing or fraud laws were cited because sending orders intended to dupe the market—and make money from the ruse—was always illegal. “Market manipulation has been a crime for decades, and the advent of the spoofing statute just made charging and proving these cases a little easier,” he said.

The Commodity Futures Trading Commission, a regulatory agency that polices derivatives markets, also has investigated spoofing. But traders say criminal cases that might result in prison time are more likely to deter wrongdoing.

“There has been serial under-enforcement in the commodities and derivatives space,” Mr. Zink told the Futures Industry Association, a trade group, in April. “Our objective here is not to point at the scoreboard and rack up numbers. Our objective is to help the regulator, the CFTC, police the markets.”

Prosecutors have recently broadened their enforcement campaign through cases that allege manipulation of commodity prices, not just futures. A former trader at Glencore PLC pleaded guilty in March to conspiring to manipulate fuel-oil prices and agreed to cooperate with the government’s continuing investigation. Those efforts are now led by Avi Perry, a prosecutor Mr. Zink recruited to join the fraud section.

Many spoofing cases involved a detailed analysis of CME trading data. Mr. Zink said he came up with the data-mining approach after prosecuting healthcare fraud earlier in his career. The Justice Department uses Medicare billing data to hunt for physicians bilking government-funded insurance programs.

Mr. Zink, 43 years old, joined the Justice Department in 2010 as a trial attorney. After serving as fraud-section chief, he became the criminal division’s acting deputy assistant attorney general, a role he held until early July.

His move to Quinn Emanuel, a firm whose partners include prominent Washington attorney William Burck, reflects a pattern of former prosecutors and regulators leaving their posts to become higher-paid defense attorneys. The “revolving door” worries some advocates who say it dilutes the government’s willingness to bring challenging cases. Others say it helps federal agencies recruit more seasoned attorneys.

Nathan Muyskens, a lawyer at Greenberg Traurig LLP, said Mr. Zink was an aggressive but principled prosecutor whose investigations unsettled Wall Street. Mr. Muyskens represented the former UBS trader who was acquitted in 2018. “I don’t think the banks were sending him bouquets of flowers on his last day,” Mr. Muyskens said.

Write to Dave Michaels at dave.michaels@wsj.com

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Source: WSJ – US News

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