On Monday morning we reported that a number of traders - currently or formerly employed by UBS, HSBC and Deutsche Bank (as usual, no JPMorgan US banks were touched) - would be perp-walked and charged in an unprecedented cross-agency crackdown between the CFTC, DOJ and FBI seeking to punish spoofers of futures. This was confirmed moments ago by a CFTC press release which announced criminal and civil enforcement actions against three banks and six individuals involved in commodities fraud and spoofing schemes.
Here is what got far less publicity: it wasn't just any futures that were spoofed - all the banks and traders busted were charged for spoofing the precious metals market, i.e. gold and silver. We bring this up because there are still the occasional idiots out there who say gold and silver were never manipulated.
The banks in question, and their penalties:
Deutsche Bank will pay a $30 million civil monetary penalty and undertake remedial relief. The Orders 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."
UBS will pay a $15 million civil monetary penalty and undertake remedial relief. 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."
HSBC will pay a civil monetary penalty of $1.6 million, and cease and desist from violating the Commodity Exchange Act’s prohibition against spoofing, after an Order found HSBC engaged 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."
For those keeping count, this is roughly the 4th time HSBC has been found guilty of manipulating markets after the bank nearly lost its charter and swore it would never manipulate markets again.
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And here are the 6 traders who spoof and otherwise manipulated the precious metals market:
- Krishna Mohan
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 Mohan of 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.
- Jiongsheng Zhao
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).
- 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.
- Jitesh Thakkar & Edge Financial Technologies
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).
An amusing tangent: recall that according to court docs related to the prosecution of "May 2010" flash crash scapegoat Navinder Sarao, the former S&P spoofer allegedly asked the abovementioned founder of the trading-software company Edge Financial Technologies Inc. to modify a program to allow him to automate some trading functions.
The CFTC and Department of Justice said in their complaint that those modifications were designed to help him spoof the markets more efficiently.
It gets better: as the WSJ reported, the now arrested Jitesh Thakkar, the founder of Edge Financial and a former member of a CFTC technology-advisory committee, said in an interview that the CFTC had sent [Sarao] a letter asking him to retain all documents related to Mr. Sarao.
“I’ve spoken out against spoofing,” he said. “We didn’t create anything that does anything illegal.”
Two years later Thakkar was arrested for just that, but it also now appears that Thakkar may have used Sarao's algo himself.
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Finally, our old friend, Andre Flotron, formerly of UBS, who as we reported on several prior occasions was arrested and charged with gold-rigging after a lengthy career of doing just that at the largest Swiss bank:
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.
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Meanwhile, the S&P500 manipulation by the Fed and spoofing by HFTs continues apace, and will as long as the market keeps levitating because it is only when stocks crash, that the fingerpointing begins.
