CFTC Settles Spoofing Charges Against Trader Without Monetary Penalty
On February 25, 2019, the Commodity Futures Trading Commission (“CFTC”) settled spoofing charges brought against a former trader who pleaded guilty to similar criminal charges last year brought by the U.S. Department of Justice. In the Matter of Krishna Mohan, Admin. Proc. No. 19-06 (Feb. 25, 2019). The CFTC alleged that the trader participated in a years-long spoofing scheme in which he placed buy or sell orders he intended to cancel in a variety of futures with the purpose of stimulating supply or demand and personally profiting from the resulting price swings. The CFTC required the trader to admit to engaging in manipulative and deceptive schemes as part of the settlement, but the CFTC has not imposed monetary sanctions against him.
The Order found that the trader, both individually and in coordination with others, conspired to place thousands of fraudulent buy and sell orders in markets for E-Mini S&P 500 and E-Mini Nasdaq 100 futures contracts traded on the Chicago Mercantile Exchange, and E-Mini Dow futures contracts traded on the Chicago Board of Trade. Specifically, on thousands of occasions between November 2013 and December 2013, the trader allegedly placed orders to buy or sell futures contracts that he intended to cancel before execution at the time orders were placed. These actions were designed to manipulate the prices for these contracts and create the appearance of demand. The CFTC therefore alleged that the trader violated Sections 4c(a)(5)(C) and 6(c)(1) of the Act, 7 U.S.C. §§ 6c(a)(5(C), 9(a) (2012), and Regulation 180.1(a)(1) and (3), 17 C.F.R. § 180(a)(1), (3) (2018). The trader entered into a formal cooperation agreement with the CFTC’s Division of Enforcement in October 2018 in connection with these allegations. In exchange for his cooperation, the CFTC did not impose monetary sanctions at the present time. According to the Order, the CFTC reserved its right to determine sanctions at a later date based on his cooperation. Until that time, however, the trader agreed to cease and desist from violating the Commodity Exchange Act’s prohibition on spoofing and the use of manipulative and deceptive schemes, is banned from trading and other activities in CFTC-regulated markets for three years, and is obligated to cooperate in ongoing CFTC investigations.
This development—which appears to be in line with federal prosecutors’ practice of delaying sentences for cooperating defendants until the conclusion of the cooperation—underscores the Commission’s recent efforts to offer more incentives for companies and individuals to cooperate and self-report conduct to the Commission.
CATEGORY: Regulatory Enforcement Matters