Economy

Lending trio and eight bankers face USA "spoofing" civil and criminal charges

Lending trio and eight bankers face USA

US authorities are set to issue a multi-million-dollar fine against three banks for the manipulation of the futures market.

Federal prosecutors charged two CT men with "spoofing" phantom orders in commodities markets with the intent of reaping profits as other traders reacted to what they thought were legitimate orders, as part of a larger investigation resulting of UBS, HSBC and Deutsche Bank resulting in fines of almost $47 million against the companies.

A spokesperson for HSBC told Reuters it was pleased the matter had been resolved, while UBS had not responded to a request for comment.

The individuals, some of whom had formerly been employed as traders by UBS, Deutsche Bank and HSBC, will be charged as part of a multi-agency probe by the Commodity Futures Trading Commission, the Department of Justice and the Federal Bureau of Investigation into the manipulative trading behavior, two of the sources said.

The Justice Department also announced Monday that it had charged eight individual traders with spoofing or market manipulation.

Monday's cases are the most significant action taken against banks for spoofing since the CFTC fined Citigroup Inc.

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The bank investigations have been ongoing for more than a year, one of the people said.

James McDonald, director of enforcement at the CFTC, which regulates derivatives markets, said electronic and algorhythmic trading had created opportunities both for legitimate trading, which CFTC supported, and for fraud. Citigroup neither admitted to nor denied the allegations.

Mr. Flotron's lawyer Marc Mukasey said in an email Monday, "This new C.F.T.C.is an enormous waste of taxpayers' money because the C.F.T.C. knows darn well that there is a pending criminal matter, that Mr. Flotron has always been retired from the business, and that he lives in Switzerland".

A Deutsche Bank spokesman said the bank "has provided substantial and proactive cooperation with the government's investigation and has enhanced controls and surveillance to help ensure that the underlying conduct does not occur in the future".

Outlawed by financial regulations in the Dodd-Frank Act, spoofing uses complex computer algorithms to allow futures traders to manipulate markets by quickly placing and canceling orders, creating artificial supply or demand that tricks other traders into buying or selling.

The suspects were based in New York, Switzerland, Britain, Australia, the United Arab Emirates.


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