David Skudder placed hundreds of large orders for soybean futures that he intended to cancel before execution (spoof orders) while placing orders on the opposite side in the soybean futures market, or cross-market in the options on soybeans futures market (genuine orders).
The Commodity Futures Trading Commission has charged David Skudder, Global AG, and Nesvick Trading for spoofing—bidding or offering with the intent to cancel the bid or offer before execution—and for the use of manipulative schemes involving both soybean futures contracts and options on soybean futures contracts traded on the Chicago Board of Trade.
According to the regulator, some of the misconduct involved cross-market spoofing, in which two correlated markets are used for the manipulative scheme.
David Skudder is a founder of Global AG, a registered commodity trading advisor. Skudder is also a registered associated person of Nesvick, a registered introducing broker.
CFTC Acting Director of Enforcement Vincent McGonagle, said: “Through this action, the CFTC shows it continues to vigorously detect and prosecute spoofing and manipulation, including when actors attempt to obscure their misconduct by using different markets or financial products.”
The CFTC alleges that between September 2014 and March 2019, David Skudder placed hundreds of large orders for soybean futures that he intended to cancel before execution (spoof orders) while placing orders on the opposite side in the soybean futures market, or cross-market in the options on soybeans futures market (genuine orders), that would benefit from market participants’ reactions to his spoof orders.
David Skudder allegedly deceived other traders about supply and demand, misleading market participants about the likely direction of the commodity’s price, which made his genuine orders appear more attractive to market participants and allowed him to execute his genuine orders in larger quantities and at better prices than he otherwise would have, absent the spoof orders.
Last week, the U.S. District Court for the Northern District of Illinois issued final judgments and consent orders against James Vorley and Cedric Chanu, former precious metals traders, for spoofing and engaging in a deceptive or manipulative scheme.
Judge Steven C. Seeger ordered a $150,000 civil monetary penalty on each defendant, a five-year ban from trading on or subject to the rules of any registered entity, and from registering with the CFTC in any capacity. The defendants have agreed to settle without admitting or denying the charges against them.
James Vorley and Cedric Chanu were precious metals traders at Deutsche Bank in London and, in 2021, they were each sentenced by a federal jury in the Northern District of Illinois to one year and one day in prison for their fraudulent trades.
Neither Mr. Chanu nor Mr. Vorley served the sentence since the district court ordered them free on bail pending their appeal of their convictions, which remains pending.
They placed numerous fraudulent precious metal orders on exchanges in New York, Singapore, and Hong Kong and canceled them just before execution.
