DOJ stands behind testimony of ex-Morgan Stanley trader in spoofing case

The United States Department of Justice (DOJ) has opposed an attempt by former JPMorgan traders accused of spoofing to exclude the testimony of a former Morgan Stanley trader, who is now an FBI agent.

As FX News Group has reported, former JPMorgan traders Gregg Smith, Michael Nowak, Jeffrey Ruffo, and Christopher Jordan have sought to prevent the testimony of Special Agent Jonathan Luca. Some two weeks after the defendants filed their motion, the DOJ has submitted a reply in opposition. In the document, the DOJ argues that Special Agent Luca qualifies—and has qualified—as an expert on jargon in the precious metals industry based on his experience working as a precious metals trader and his extensive investigation of spoofing cases as an FBI agent.

Agent Luca is qualified to provide expert testimony regarding terms and jargon in certain electronic communications at issue in this case, the DOJ argues. Agent Luca joined the FBI’s New York Field Office in July 2011. In the ensuing ten years, Agent Luca’s work focused on cases of complex financial fraud involving securities and commodities, including insider trading, market manipulation, and fraud and spoofing in the precious metals futures markets.

Agent Luca has worked on about one hundred cases with approximately half involving commodities. During his work on these cases, Agent Luca estimates that he has reviewed hundreds of thousands of relevant chats and interviewed over one hundred people involved in trading, including in commodities. Through this work, Agent Luca gained substantial exposure to industry terms and jargon used by traders.

In addition, Agent Luca has the added layer of expertise of having worked as a trader, primarily of precious metals, for over two years at a large financial institution, Morgan Stanley, in the very same industry as the defendants. This relevant professional experience only strengthens Agent Luca’s already firm foundation for expert testimony and leave little doubt that Agent Luca’s combined experience affords him more insight than a layperson into industry practices and jargon, demonstrating that his testimony will assist the jury, according to the DOJ.

Prior to Morgan Stanley, Agent Luca held internships in the finance industry, including in the internal audit department of the New York Mercantile Exchange (NYMEX). Agent Luca also holds a Bachelor of Science degree in Business Administration with concentrations in finance and marketing.

The DOJ says that the defendants ignore and discount all of Agent Luca’s relevant experience working in the precious metals trading industry, and investigating the precious metals trading industry, when they claim he lacks the expertise to provide expert testimony regarding jargon used in the precious metals trading industry.

In particular, Defendants challenge Agent Luca’s expertise to interpret terms related to barrier options (i.e., “protect a barrier,” “run a barrier,” and “play with a barrier”), claiming he was never traded barrier options specifically and therefore lacks the requisite expertise. But the phrases related to barrier options that Agent Luca will interpret are not rooted deep in the purported complexities of barrier options trading, the DOJ notes.

The terms Agent Luca will interpret all relate to placing or executing orders in an attempt to artificially move the market price through (e.g., “run a barrier”) or away (e.g., “protect a barrier”) from a particular price level. To that end, Agent Luca’s experience in the precious metals trading industry combined with his experience as an agent investigation multiple precious metals market manipulation cases, provide him with the basis to explain to the jury what traders in the industry mean when they say they are trying to “run,” “protect,” or “play with a” barrier.

Defendants also assert that Agent Luca cannot opine on certain “more lengthy statements” (e.g., “make it look bid, but sell,” “they take my hidden offer every time, as I bid in front of it”) because they claim these statements are not the “type of coded language” that is appropriate for expert testimony.

The DOJ says that this argument ignores the purpose of Agent Luca’s expert testimony, namely, to explain industry jargon – such as that contained in these statements – which is not commonly understand by the average person. The length of the statement, or whether defendants can find the statement’s exact formulation elsewhere in the discovery in this case, does not undermine the fact that Agent Luca’s expert testimony will assist the jury’s understanding of the statements.

Ultimately, to the extent that the defendants wish to challenge Agent Luca’s interpretation of any specific phrases or terms, that is more appropriately done through cross-examination at trial, not exclusion of his testimony, the DOJ concludes.

The Government says that Agent Luca’s expert testimony is admissible.