Sunday, 09 December, 2018

U.S. fines Deutsche Bank, UBS and HSBC over 'spoofing' fraud

A man walks past Deutsche Bank offices in London Luke Mac Gregor | Reuters A man walks past Deutsche Bank offices in London
Nellie Chapman | 30 January, 2018, 04:27

Federal prosecutors on Monday announced charges against eight traders for deceptive trading practices in the futures markets, with all but one person charged with illegal spoofing.

Deutsche Bank AG, HSBC Holdings Plc and UBS Group AG agreed to pay about $50 million to settle civil claims of manipulating futures markets.

CFTC alleges that the banks manipulated the pricing of the US futures market through so-called "spoofing", whereby a market participant is placing bids to buy a futures contract with the intent to stop it before its execution, "Reuters" said. The traders and their co-conspirators allegedly placed hundreds, and in some cases, thousands of orders that they did not intend to complete, according to the Justice Department.

The DOJ's Acting Assistant Attorney General, John P Cronan, said the alleged conduct "reflects a disturbing and reckless trend of individuals and companies seeking to put illicit gains and profits above honest and law abiding conduct". Deutsche Bank and UBS did not immediately respond to requests for comment.

Spoofing is a criminal offense under a provision implemented as part of the 2010 Dodd-Frank financial reform.

The case is the largest crackdown, so far, on what Wall Street has increasingly complained is abuse of sophisticated computer algorithms to illegally place and quickly cancel bids on commodity contracts, a practice known as "spoofing".

This case is brought in connection with the CFTC Division of Enforcement's Spoofing Task Force, and the staff members responsible for this action are Margaret Aisenbrey, Allison Sizemore, Joyce Brandt, Thomas Simek, and Charles Marvine.

Including already-indicted ex-UBS trader Andre Flotron, seven former brokers and a tech consultant - based in New York, Switzerland, Britain, Australia and the United Arab Emirates - face charges for placing, then aborting, deals to manipulate various metal market prices from early 2008 to 2014.

Rob Sherman, a spokesman for HSBC, said the bank was "pleased to have resolved this issue".

The charges against the traders primarily reference activity before 2015, when both firms and regulators lacked sufficient controls to monitor for spoofing activity, as trading migrated from open pits to electronic platforms. Edward Bases, 55, and John Pacilio, 53, both of CT and based in New York City, were charged in a criminal complaint with commodities fraud.

The cases mark the first major enforcement actions of 2018 for the CFTC and Mr. McDonald, who took over as enforcement director in April 2017.