United States fines 3 banks RM181 million for 'spoofing' precious metal trades


Deutsche Bank, UBS and HSBC will together pay a total of US$46.6 million (RM181 million) to settle allegations that traders at the banks worked to manipulate futures markets in precious metals through a process known as "spoofing", the Justice Department and Commodity Futures Trading Commission said.

Michael Coscia, a New Jersey-based trader, was the first person to be tried under an anti-spoofing law that was part of the 2010 Dodd Frank financial reforms.

In a criminal complaint, Thakkar is accused of developing a software program that helped an unnamed commodities trader engage in "spoofing", placing thousands of bids or offers on the E-mini S&P, a market on the Chicago Mercantile Exchange, with the intent of canceling the trades before they were executed, but after bids were placed on the other side of the market. Prior to this case, only three other people had been charged with the crime of spoofing, according to the Justice Department. The orders create the illusion of demand, which distorts prices in a way that benefits the trader's positions. The CFTC said in accepting HSBC's settlement, it "recognizes the bank's cooperation during the Division of Enforcement's investigation of this matter".

"Spoofing is a particularly pernicious example of bad actors seeking to manipulate the market through the abuse of technology", said James McDonald, the CFTC's enforcement director. All three cooperated with the investigation.

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"These cases should send a strong signal that we at the CFTC are committed to identifying individuals responsible for unlawful activity and holding them accountable". They are located around the world in countries such as the US, Switzerland, UK, Australia and the United Arab Emirates. Federal officials said Thakkar, 41, of Naperville, was arrested Monday in IL.

"The cases against Mr. Flotron are misguided and have no merit".

McDonald, a former prosecutor in the Southern District of NY who was appointed to the CFTC role in March, has said he aims to achieve that by encouraging companies and staff to report their own wrongdoing and cooperate with investigators, in return for more lenient penalties.