In their latest contribution to Law360, LSW partners Michael D. Longyear and John S. Siffert and associate Zachary B. Shemtob analyze a novel SDNY jury instruction on scienter in a recent open market manipulation trial.

The defendant in United States v. Phillips was accused of manipulating the forex market by engaging in non-bona fide trades for the purpose of unlawfully triggering an option contract.  The defendant argued that his trades were legitimate in order to manage risk and not made to trigger the option payment.  The government sought a jury instruction that the defendant was guilty of market manipulation even if he was motivated in part by legitimate reasons, as long as at least one reason behind the defendant’s trades was to manipulate the market to trigger the option.  The defendant countered that the government is required to prove that manipulating the market was the sole reason for engaging in the trades. 

The authors review the adversarial positions, the Court’s ultimate instruction, and the likely implications for future cases, and consider whether a “dual intent” and “but for” charge in open market forex trading prosecutions risks impermissibly substituting “motive” for “scienter.”

Read the article here.