(Bloomberg) — A former trader at Bank of America Corp.’s Merrill Lynch unit told a federal jury in Chicago that he learned how to manipulate the price of precious metals from two more senior traders in the bank’s New York office, John Pacilio and Edward Bases.
Harnaik Lakhan said he used Merrill’s internal computer system to watch Pacilio and Bases, who are on trial for alleged spoofing, issue buy and sell orders they didn’t intend to be filled, pushing prices up or down to make it profitable for orders they wanted to execute. Lakhan, who agreed to cooperate with the government to avoid prosecution, said he began using the same techniques from his office in London.
“I wanted to push the market price to my true, intended trade,” Lakhan, who worked at Merrill’s London office from 2007 to 2013, testified on Thursday.
“I knew it was wrong to do, but it helped us make money and get trades done,” he said. “You’ve got to make money. If you don’t make money, you’re out of there.”
Bases and Pacilio face about 20 charges related to alleged spoofing trades in precious-metals markets from 2008 to 2014.
Lakhan was a desk assistant for Pacilio and other traders before becoming a trader himself. When Bases joined Merrill in 2010, Lakhan traveled to New York to help set up his desk right next to Pacilio.
Lakhan said he “frequently” saw Bases and Pacilio spoofing because he was watching their trading activity “all the time.” While Pacilio typically used a single large order to push the market, Bases favored using many smaller orders, Lakhan said.
During Thursday’s testimony, prosecutor Scott Armstrong displayed a copy of a portion of an exchange on an instant messaging group chat used by Merrill traders, including Lakhan. The chat log showed Pacilio messaged the group that he had in an order “to spoof the gold” in November 2009.
Lakhan said he’s had a variety of jobs since he left as a metals trader at Morgan Stanley in 2015. He’s tutored students in math and English, been a support worker for adults with autism and now works at an Amazon fulfillment center packing boxes.
Defense attorneys for Bases and Pacilio have not yet begun cross-examining Lakhan.
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