Major Spoofing Sweep Announced By CFTC and DOJ - The Industry Spread

Michael Volpe

After spending a decade in finance, Michael Volpe has been a freelance investigative journalist since 2009. His work has been published locally in the Chicago Reader, Chicago Crusader, Chicago Heights Patch, and New City. Nationally, Volpe's work has appeared in a wide variety of publications including the Washington Examiner, the Daily Caller, Crime Magazine, the Southern Christian Leadership Conference Newsletter, and Counter Punch. Volpe has been recognized by whistleblowers as leading the charge in getting their stories out. His first book Prosecutors Gone Wild was published in October 2012, his second book The Definitive Dossier of PTSD in Whistleblowers was published in February 2013 and his third book Bullied to Death was published in August 2015.

US DOJ

Major Spoofing Sweep Announced By CFTC and DOJ

January 30, 2018

The Commodities Futures Trading Commission (CFTC) and the US Department of Justice (US DOJ)made a major anti-spoofing sweep against three European banks and six traders they employed.

The CFTC made the announcement in a press release.

“The Commodity Futures Trading Commission today announced, in conjunction with the Department of Justice and Federal Bureau of Investigation’s Criminal Investigative Division, criminal and civil enforcement actions against three banks and six individuals involved in commodities fraud and spoofing schemes.

The three banks are Deutsche Bank, UBS, and HSBC.

Deutsche Bank was fined $30 million in a spoofing scheme which the CFTC said occurred from February 2008 through September 2014.

CFTC“The Commodity Futures Trading Commission (CFTC) today issued an Order filing and settling charges against Deutsche Bank AG (DB AG) and Deutsche Bank Securities Inc. (DBSI) (collectively, DB), requiring DB to pay a $30 million civil monetary penalty and to undertake remedial relief.” The CFTC stated. “The Order finds that from at least February 2008 and continuing through at least September 2014, DB AG, by and through certain precious metals traders (Traders), engaged in a scheme to manipulate the price of precious metals futures contracts by utilizing a variety of manual spoofing techniques with respect to precious metals futures contracts traded on the Commodity Exchange, Inc. (COMEX), and by trading in a manner to trigger customer stop-loss orders.”

An email to Deutsche Bank’s media relations department was left unreturned.

UBS was fined $15 million for a spoofing scheme which the CFTC said lasted January 2008 through December 2013.

“The Commodity Futures Trading Commission (CFTC) today issued an Order filing and settling charges against UBS AG (UBS), requiring UBS to pay a $15 million civil monetary penalty and to undertake remedial relief.” The CFTC said of UBS. “The Order finds that from January 2008 through at least December 2013, UBS, by and through the acts of certain precious metals traders on the spot desk (Traders), attempted to manipulate the price of precious metals futures contracts by utilizing a variety of manual spoofing techniques with respect to precious metals futures contracts traded on the Commodity Exchange, Inc. (COMEX), including gold and silver, and by trading in a manner to trigger customer stop-loss orders.”

Peter Stack, managing director of media relations at UBS Americas, provided The Industry Spread with this statement: “UBS is pleased to have resolved this several-year-old matter. As the CFTC recognizes in the settlement, UBS self-reported this alleged conduct to the CFTC, cooperated fully in the investigation, and has long since remediated the conduct.”

HSBC was fined $1.6 for “engaging in numerous acts of spoofing with respect to certain futures products in gold and other precious metals traded on the Commodity Exchange, Inc. (COMEX). The Order finds that HSBC engaged in this activity through one of its traders based in HSBC’s New York office. The Order requires HSBC to pay a civil monetary penalty of $1.6 million, to cease and desist from violating the Commodity Exchange Act’s prohibition against spoofing, and to take specified steps to implement and strengthen their training, systems, and controls to detect and deter spoofing by HSBC personnel in the futures markets. In accepting HSBC’s offer of settlement, the CFTC recognizes the bank’s cooperation during the Division of Enforcement’s investigation of this matter.”

An email to HSBC’s media relations department was also left unreturned.

Six traders were also cited:

Krishna Mohan

Here’s part of CFTC’s statement.

The CFTC today announced the filing of a federal court enforcement action in the U.S. District Court for the Southern District of Texas against Krishna Mohanof New York City, New York, charging him with spoofing (bidding or offering with the intent to cancel before execution) and engaging in a manipulative and deceptive scheme in the E-mini Dow ($5) futures contract market on the Chicago Board of Trade and the E-mini NASDAQ 100 futures contract market on the Chicago Mercantile Exchange.”

The US DOJ stated: “Lastly, Krishna Mohan, allegedly a commodities trader at a proprietary electronic trading firm with locations around the world, was charged in the Southern District of Texas with commodities fraud and spoofing offenses.

“Mohan allegedly engaged in manipulating Dow and NASDAQ E-Mini futures in hundreds of episodes by employing an illegal spoofing strategy that involved placing orders on both sides of the market.”

Jitesh Thakkar & Edge Financial Technologies

Here’s part of CFTC’s statement.

“The CFTC today announced the filing of a federal court enforcement action in the U.S. District Court for the Northern District of Illinois, charging Jitesh Thakkar of Naperville, Illinois, and his company, Edge Financial Technologies, Inc. (Edge), with aiding and abetting spoofing and a manipulative and deceptive scheme in the E-mini S&P futures contract market on the Chicago Mercantile Exchange (E-mini S&P).”

The US DOJ noted: “As alleged in the criminal complaint, Thakkar is the founder and principal of Edge Financial Technologies, Inc., a Chicago-based information technology consulting firm that specialized in creating custom computer programs for sophisticated commodities traders.

“Thakkar allegedly was involved in creating a software program that was used by his co-conspirator to engage in spoofing through the placement of thousands of S&P 500 E-mini futures contract orders.  This automated trading program was allegedly designed to prevent certain spoof orders from actually being executed by automatically moving the spoof orders to the back of the order queue.”

Jiongsheng Zhao

Here’s part of the CFTC’s statement: “The CFTC today announced the filing of a federal court enforcement action in the U.S. District Court for the Northern District of Illinois against Defendant Jiongsheng Zhao, of Australia, charging him with spoofing and engaging in a manipulative and deceptive scheme in the E-mini S&P 500 futures contract market on the Chicago Mercantile Exchange (CME).”

Meanwhile, the US DOJ noted: “The third case charges Jiongshen Zhao with various spoofing and fraud offenses, along with making false statements to a registered entity, the Chicago Mercantile Exchange.

Chicago Mercantile ExchangeAs alleged, Zhao – a trader at a proprietary trading firm located in Sydney, Australia – manipulated the S&P 500 E-Mini futures market in hundreds of individual episodes between approximately 2012 and 2016, by employing an illegal spoofing strategy.

James Vorley & Cedric Chanu

The CFTC “announced the filing of a civil enforcement action in the U.S. District Court for the Northern District of Illinois against James Vorley, a U.K. resident, and Cedric Chanu, a United Arab Emirates resident, charging them with spoofing and engaging in a manipulative and deceptive scheme in the precious metals futures markets.”

Meanwhile, the US DOJ noted: “The first case alleges that two precious metals traders – James Vorley of the United Kingdom and Cedric Chanu, a French citizen – participated in a scheme to commit spoofing, wire fraud, and commodities fraud by placing thousands of orders in connection with over one hundred instances of coordinated spoofing between approximately 2008 and 2015.“

Andre Flotron

The CFTC “announced the filing of a civil enforcement action in the U.S. District Court for the District of Connecticut against Andre Flotron, of Switzerland, charging him with engaging in a manipulative and deceptive scheme and spoofing in the precious metals futures markets on a registered entity.”

Meanwhile, the US DOJ stated: “We also are announcing today charges that were previously filed in the District of Connecticut against an alleged precious metals futures trader for UBS AG named Andre Flotron.  Flotron allegedly conspired with other UBS precious metal traders to engage in spoofing between approximately 2008 and 2013.”

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