In United States v. Bogucki4, a criminal proceeding in the United States District Court of the Northern District of California, Judge Charles R. Breyer acquitted defendant Robert Bogucki on February 28, 2019, on all counts related to wire fraud affecting a financial institution5 and conspiracy to commit wire fraud affecting a financial institution.6 The Court’s acquittal of Bogucki calls into question whether and under what circumstances federal wire fraud statutes7 can be used to prosecute “front-running,” a trading strategy that is also prohibited under the CEA8 and the Commodity Futures Trading Commission’s (CFTC) regulations9 if a broker engages in fraud and manipulation.10
(2) The DOJ Declination Letter
Prior to the Court’s ruling in Bogucki, on February 28, 2018, the Government issued a letter declining to prosecute Bogucki’s employer, an international investment bank and financial services provider (the Bank), for its role in the alleged front-running scheme FX transactions with its counterparty.11 The Declination Letter required the Bank to disgorge $12,896,011 to the U.S. Treasury for allegations involving fraud and market manipulation.12 The Bank also agreed to pay restitution to its counterparty.
Importantly, the DOJ also noted the Bank’s self-disclosure, internal investigation, cooperation, continued compliance, remediation, and further cooperation as key factors in declining to further prosecute the Bank. The DOJ, however, directed the Bank to implement enhanced compliance policies and procedures to safeguard client confidential business information, maintain documentation related to such confidential information, and “address appropriate conduct in responding to potential conflicts of interest with clients that place orders for execution by [the Bank].”13