DOJ and CFTC Bring Actions Against Precious Metals Traders


Posted on September 20, 2019, by Victoria L. Andrews and Mary P. Hansen in CFTC, Criminal Liability, DOJ, Layering, Parallel Investigations, Spoofing. Comments Off on DOJ and CFTC Bring Actions Against Precious Metals Traders

Recently, the Department of Justice indicted three precious metals traders in the Northern District of Illinois, charging each them with violating the Racketeer Influenced and Corrupt Organization Act (“RICO”), committing wire and bank fraud, and conspiring to commit price manipulation, bank fraud, wire fraud, commodities fraud, and “spoofing.” Two of those traders were also charged with committing commodities fraud, spoofing, and attempted price manipulation and were named as defendants in a civil suit brought by the CFTC in the same court, alleging violations of the Commodity Exchange Act and CFTC Regulations.

Both the indictment and the civil complaint contend that over the course of approximately seven years, the defendants intentionally manipulated the price of precious metals futures contracts by “spoofing,” or “placing orders to buy or sell futures contracts with the intent to cancel those orders before execution.” Specifically, both the indictment and the CFTC complaint detailed numerous instances in which the defendants allegedly placed “genuine orders” to either buy or sell futures contracts that they intended to execute, some of which were “iceberg” orders placed without publically displaying their full size. According to the indictment and complaint, after such orders were placed, defendants then quickly placed one or more opposite orders, sometimes “layering [them] at different prices in rapid succession” in order to give the impression that demand for such contracts was rising or falling, depending on the nature of the trader’s genuine orders. Once genuine orders were fulfilled, defendants would allegedly cancel the opposite orders prior to execution. The DOJ and CFTC contend that such conduct allowed the defendants “to generate trading profits and avoid losses for themselves” and others, including their employer and its precious metals desk.

According to the indictment, which also relied upon electronic chat conversations between defendants and other co-conspirators (both named and unnamed) and the submission of allegedly false annual compliance certifications, these actions constituted RICO violations as well as fraud. Likewise, the civil complaint alleged that such actions violated the Commodity Exchange Act’s prohibition on spoofing, and seeks monetary penalties, injunctions, and trading and registration prohibitions.





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