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CFTC hits 9 bad actors in one day

Talk about a bloody Monday. The U.S. Commodity Futures Trading Commission (CFTC) is on a roll this January, submitting nine separate charges against organizations and individuals in a single day: Monday, January 29, 2018 to be exact.  And that doesn’t include 12 other actions the CFTC announced since the beginning of the new year. Most involve some sort of spoofing scheme.

Speaking of the deluge, CFTC Division of Enforcement Director James McDonald said, “Spoofing is a particularly pernicious example of bad actors seeking to manipulate the market through the abuse of technology… that have enabled electronic and algorithmic trading that created new opportunities in our markets.  (While) the CFTC, (is) committed to facilitating these market-enhancing developments.  But at the same time, we recognize that these new developments also present new opportunities for bad actors.  We are equally committed to identifying and punishing these bad actors.”

Here’s the latest roundup of commodity future trading in the CFTC’s enforcement hit parade:

HBSC, Deutsche Bank, and UBS

The CFTC filed eight anti-spoofing actions against the three banks and six individuals as follows:

  • Deutsche Bank AG and Deutsche Bank Securities to pay a $30 million civil monetary penalty in addition to “remedial relief” for actions taken by traders engaged in a scheme of manual spoofing to manipulate the price of precious metals futures contracts from February 2008- September 2014.
  • UBS will pay a $15 million civil monetary penalty and also provide “remedial relief” for similar activities by traders on the spot desk from January 2008- December 2013.
  • HSBC also will pay $1.6 million to cease and desist violating the CFTCs prohibition against spoofing and strengthen their training systems and controls to deter and detect HSBC spoofers.
  • Jitesh Thakkar and Edge Financial Technologies, Inc., of Naperville, IL, were charged with aiding and abetting spoofing and a manipulative and deceptive scheme in the E-mini S&P futures contract market. Thakkar, Edge’s president’s bad actions were uncovered when a trader, cooperating with the CFTC reached out to him and asked him to design and develop a custom trading software application that would help him spoof and inject false information into the market. Thakkar did and also developed a “Back-of-the-Book” function which was used from January 30, 2013 through October 30, 2013.
  • Jiongsheng Zhao of Australia has also been charged with repeatedly engaging in manipulative or deceptive acts and practices – placing an order he wanted to execute and thereafter entering a larger order on the opposite side of the market – from at least July 2012-March 2017.
  • New York City-based Krishna Mohan has been charged, according to Director McDonald, with placing tens of thousands of spoof orders over a multi-week period, including the use of a “Smart Stuffing” book.
  • UK resident James Vorley and UAE resident Cedric Chanu have been charged with repeatedly engaging in deceptive acts and practices while working at a large financial institution. They placed orders for COMEX gold, silver, platinum or palladium futures contracts they wanted filled (Genuine Order) and then entered orders on the opposite of the market that they intended to cancel before execution (Spoof Order) from at least May 2018 through July 2013.
  • While working as a precious metals trader at a bank, Andre Flotron of Switzerland has also been charged with placing large orders to buy or sell metals futures that he intended to cancel before execution. In addition, Flotron was assigned to train another trader at the same bank and in the course of this training, taught the trader how to spoof.

Was it worth the risk?

Apparently not. Of course, bad apples, institutional or individual, never think they are going to get caught. Was it worth it the exposure, fines, and potential jail time? That’s a question only you can answer. But that’s also where Patrina can help. We’ve built a business on helping organizations stay on the “straight and narrow” efficiently and cost-effectively. So, let’s talk. Call 212-233-1155 to ask about Patrina’s cost-effective and comprehensive, 8-module compliance solution, and compliant data capture, file storage, and records archiving specifically designed for the financial services community. Be smart. Be covered.

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