Slovakian Trader Fined $750,000 For ‘spoofing’ Oil Futures

A Slovakian trader and his company agreed to pay $750,000 to resolve probes from the Commodity Futures Trading Commission (CFTC) over their role in the manipulation of oil markets.

The CFTC action is focused on a spoofing activity carried out by Roman Banoczay Jr. (Banoczay Jr.) of Bratislava, Slovakia, as an agent of Roman Banoczay Sr. (Banoczay Sr.) and their company, BAZUR Spol. S.R.O. (BAZUR). This activity occurred in a scheme that ran for a four-week period in early 2018 and involved dozens of fraudulent orders that were canceled before execution, a practice known as spoofing.

While there is nothing wrong with canceling orders, the regulator said the trader capitalized on the increased buying or selling interest that spoof orders created. He placed the genuine order, which he intended to execute, on the opposite side of the market. Then, the spoof orders were canceled within seconds of the genuine order being filled and only after prices moved in the direction the spoofer wanted.

Though the tactic has long been used by some traders, regulators began clamping down on it only a few years ago. Specifically, the Dodd-Frank Act gives the CFTC the explicit authority to crack down on the practice.

“Banoczay Jr. placed thousands of orders with the intent to cancel them in order to send false signals of increased buying or selling interest designed to trick market participants into executing the orders that he wanted filled. Although Banoczay Jr. was the only individual who placed and canceled these spoof orders, the court found that Banoczay Sr. and BAZUR are vicariously liable for Banoczay Jr.’s violations because Banoczay Jr. served as their agent and committed these violations within the scope of his agency. Banoczay Jr. was previously the subject of a disciplinary action brought by the CME Group, Inc. for the same underlying conduct,” the statement further reads.

Regulators and exchanges have stepped up their policing of spoofing in recent years. However, the people and firms they previously focused on were rather small-time avid gamers in markets.

Earlier in November, JPMorgan Chase and two subsidiaries reached a settlement agreement with US regulator to pay $60 million to resolve civil and criminal charges that its traders rigged precious metals futures and options.
JPMorgan, which did not admit wrongdoing in agreeing to the settlement, denied the allegations for years, and in 2016 succeeded in getting the plaintiffs’ claims dismissed by a judge. However, traders in precious metals futures and options then appealed that decision, and got the case reopened in 2017.

A former J.P. Morgan Chase trader charged with participating in a “spoofing” scheme to maximize profits on the precious metals market pled guilty in a US federal court in 2020.