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September 30, 2020

Marcus Schulz will pay over $1 million – a $670,000 penalty and $427,000 in disgorgement – to resolve CFTC allegations that, while employed as an energy trader, he passed on confidential information to an outside broker, including information about his employers block trade orders.  The broker would then arrange to take the other side of the order at prices that allowed the broker and others involved in the scheme to make a profit on offsetting trades, which profits they shared with Schulz.  CFTC

Tagged in: Financial Institution Fraud, Fraud in CFTC-Regulated Markets, Insider Trading, Market Manipulation and Trading Violations,

July 20, 2020

UBS Financial Services Inc. and two of its registered representatives will pay $10 million in penalties, disgorgement, and interest to resolve claims that UBS improperly redirected municipal bond offerings away from retail customers and to “flippers,” who re-sold the bonds to other broker-dealers, including UBS.  This practice allowed UBS to circumvent the priority retail order periods set by bond issuers and improperly obtain a greater allocation of bonds for its own inventory.  SEC

Tagged in: Financial and Investment Fraud, Financial Institution Fraud, Market Manipulation and Trading Violations, Regulatory Violations, Securities Fraud,

June 18, 2020

Deutsche Bank AG has agreed to pay over $10 million to settle two enforcement matters with the CFTC.  The first matter, settled for $1.25 million, involved numerous instances of spoofing by two Tokyo-based traders of Deutsche Bank Securities Inc. in 2013.  The second matter involved a swap reporting platform outage in 2016 that prevented Deutsche Bank from reporting swap data for five full days, exacerbated existing reporting problems, and ultimately caused new reporting problems, including some that violated a 2015 CFTC order.  To settle that matter, Deutsche Bank will pay $9 million, as well as undergo compliance monitoring.  CFTC

Tagged in: Fraud in CFTC-Regulated Markets, Market Manipulation and Trading Violations,

November 7, 2019

Tower Research Capital, LLC, a proprietary trading firm, has been ordered to pay a record $67.4 million for engaging in a manipulative and deceptive spoofing scheme from 2012 to 2013.  The Commission found that when Tower traders had genuine orders on one side of the market, they would also place orders on the other side that they intended to cancel before execution, intending to create a false impression of supply and demand to induce other market participants to trade against their genuine orders. The judgment for over $32.6 million in restitution, $10.5 million in disgorgement, and $24.4 million in civil monetary penalty is reportedly the largest ever ordered in a spoofing case. Tower also entered into a deferred prosecution agreement in a settlement with DOJ, crediting their monetary settlement with the CFTC and imposing compliance obligations. CFTC; DOJ

Tagged in: Criminal Proceedings, Fraud in CFTC-Regulated Markets, Market Manipulation and Trading Violations,

October 2, 2019

Brokerage firms BGC Financial LP and GFI Securities LLC will pay $15 million and $10 million, respectively, to the CFTC, and $7.5 million and $5 million, respectively, in penalties under New York's Martin Act based on the admitted practices of their brokers in posting sham bids and offers on foreign exchange options in emerging markets currencies referred to as EFX options.  This so-called "flying" of prices was done to create a false appearance of greater liquidity in the EFX options market. In addition, the brokers engaged in the "printing" of fake trades on EFX options, falsely representing that trades had occurred at particular levels and prices in an effort to induce follow-on trades at the same levels.  In addition to the monetary penalties, the brokerage firms have agreed to additional compliance, monitoring, and oversight.  CFTC;  NY

Tagged in: Financial and Investment Fraud, Financial Institution Fraud, Fraud in CFTC-Regulated Markets, Market Manipulation and Trading Violations,

October 2, 2019

Brokerage firm Lek Securities Corp. and its CEO Sam Lek will pay almost $2 million to resolve allegations that they facilitated the manipulative trading scheme of Ukraine-based customer Avalon FA, Ltd.  Lek provided Avalon with the means to engage in "layering" and other cross-market manipulation.  Layering involves placing and canceling orders to signal inaccurate prices.  Avalon also engaged in other practices to buy and sell stocks to artificially impact options prices.  Lek Securities will pay a $1 million penalty plus $526,000 in disgorgement and interest; Sam Lek will pay a $420,000 penalty.  Defendants have admitted the facts alleged and Lek Securities has agreed to retain an independent compliance monitor.  SEC

Tagged in: Financial and Investment Fraud, International Whistleblowers, Market Manipulation and Trading Violations, Securities Fraud,

October 1, 2019

Three firms will pay a total of $3 million to resolve claims that each violated the Commodity Exchange Act's prohibition on spoofing.  Morgan Stanley Capital Group Inc. will pay $1.5 million for engaging in spoofing the precious metals futures markets; Belvedere Trading LLC will pay $1.1 million for engaging in spoofing in the Chicago Mercantile Exchange E-mini S&P 500 futures market; and, Mitsubishi International Corporation will pay $400,000 for acts of spoofing silver and gold futures on the Commodity Exchange, Inc. markets.  CFTC

Tagged in: Financial and Investment Fraud, Financial Institution Fraud, Fraud in CFTC-Regulated Markets, Market Manipulation and Trading Violations,

September 30, 2019

Hard Eight Futures, LLC and its principal Igor Chernomzav have been ordered to pay $2.5 million in civil monetary penalties based on findings that the defendants placed bids and offers for E-mini futures contracts with the intent to cancel those orders before execution.  When placed and prior to cancellation, the bids and offers constituted a substantial percentage of the best bid or offer, creating a false impression of buying and selling interest.  CFTC

Tagged in: Financial and Investment Fraud, Fraud in CFTC-Regulated Markets, Market Manipulation and Trading Violations,

September 18, 2019

The Securities and Exchange Commission filed an emergency action against Mediatrix Capital Inc. and three of its principals for misrepresenting the profitability of an algorithmic international trading program, which the company claimed had returned “more than 1,600 percent” since its inception. According to the SEC’s complaint, the trading strategy instead consistently failed to perform, losing $18 million in 2018 alone. The company also allegedly misled investors by falsifying statements and misusing funds to pay for personal purchases, including luxury cars. The SEC estimates that Mediatrix put a total of $125 million of investor funds at risk. SEC

Tagged in: Financial and Investment Fraud, Market Manipulation and Trading Violations, Securities Fraud,

September 16, 2019

Two investment banks--Stifel, Nicolaus & Co., Inc. and BMO Capital Markets--pay $2.7 million and and $1.95 million in penalties, respectively, for failing to provide accurate data to the SEC. Broker-dealers must provide what is known as "blue sheet data," information about securities trading information that the SEC uses to monitor and investigate transactions. For a period of seven years, both entities failed to provide data and inaccurately reported information for several millions of transactions. The banks also admitted the SEC's allegations that they did not have proper mechanisms in place to verify the accuracy of their submissions. SEC

Tagged in: Financial and Investment Fraud, Financial Institution Fraud, Market Manipulation and Trading Violations, Regulatory Violations, Securities Fraud,

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