The spoofing trial of software developer Jitesh Thakkar — an attempt by federal regulators to crack down on illegal high-frequency computer trading — ended with a hung jury Tuesday in Chicago federal court
Thakkar, 42, of Naperville, was charged last year with conspiracy and aiding and abetting the notorious British “flash crash” trader Navinder Sarao in a multiyear scheme that netted millions in illicit gains.
Ten of the 12 jurors had voted to acquit Thakkar, defense attorney Renato Mariotti told the Tribune after U.S. District Judge Robert Gettleman declared a mistrial.
“The vast majority of the jurors saw what I did — that Jitesh Thakkar was innocent,” Mariotti said. “The government didn’t have enough evidence to bring this case, much less prove it beyond a reasonable doubt. The government should not pursue this misguided prosecution any further.”
While several financial traders, including Sarao, have been convicted of spoofing, Thakkar was the first software developer to be tried under a 2010 federal anti-spoofing law.
Spoofing floods the market with bogus large orders to artificially trigger price movements. The spoof orders are canceled before they are filled, with the trader placing a smaller order on the opposite side of the market at a better price.
In 2011, Thakkar’s small Chicago-based consulting firm, Edge Financial Technologies, developed a customized program that enabled Sarao to more successfully spoof the market.
Sarao made $40 million over six years trading E-Mini S&P 500 futures through the CME before pleading guilty in 2017 to federal charges of spoofing and wire fraud. Facing up to 30 years in prison, Sarao testified last week against Thakkar in a bid to reduce his sentence.
Last week, Gettleman acquitted Thakkar of conspiracy charges, but allowed the jury to decide two counts of aiding and abetting Sarao. At the core of Thakkar’s case was whether he knew the software he designed for Sarao would be used for spoofing.
During closing arguments Monday, Mariotti said Thakkar was no different than a car salesman who unwittingly sells a getaway car to a bank robber. He said Thakker should not have been expected to deduce that the software features he created would be used for illicit purposes.
“The law doesn’t make you a criminal because you’re not clever enough to connect the dots,” Mariotti said. “He is not Sherlock Holmes. He is just a computer programmer from Naperville.”
Federal prosecutors argued that Thakkar was a self-proclaimed trading technology expert, and that he worked closely with Sarao to create and refine the software for its intended purpose — illegal spoofing.
“He had the knowledge and he built Sarao his spoofing machine,” said Mark Cipolletti, a Justice Department trial attorney.
Attorneys from both sides will meet with Gettleman Wednesday morning to determine whether Thakkar will be retried.
In May 2010, Sarao’s spoof trading caused equity markets to temporarily plunge — the so-called flash crash — wiping out billions of dollars in wealth before recovering.
When Sarao approached Thakkar in 2011, he had already worked with two other software developers, but had yet to find someone who could make sure his spoof orders never got filled.
Thakkar’s firm successfully designed and refined a “back-of-the-book” function that automatically tweaked the spoof orders so that they kept moving behind other orders. If the spoof order got partially filled, the program would instantly cancel the rest of the order.
Sarao paid $24,200 for the software, with Thakkar retaining the rights to resell the customized software. He never found another buyer.