With the Department of Justice having caught three of its former traders manipulating US futures markets, Tower Research Capital has agreed to pay the largest fine ever ordered in a spoofing case.
Here is an excerpt from a Reuters report published in the Financial Post:
The proprietary trading firm agreed to pay to resolve charges through a deferred prosecution agreement with the Justice Department to resolve charges the company and three former traders engaged in unlawful activity while placing orders that benefited Tower and prompted $32.6 million in market losses, according to statements from U.S. authorities.
The total to be paid includes about $43.1 million in restitution and disgorgement and a $24.4 million civil monetary penalty, the largest total monetary relief ever ordered in a spoofing case, the CFTC said its statement.
This is the latest in a surge of U.S. actions on spoofing, a practice in which traders place orders they intend to cancel to move prices to benefit their market positions. “Free markets are not open and fair when people criminally manipulate them,” U.S. Attorney Ryan Patrick of the Southern District of Texas said in a separate Justice Department statement.
The three traders – New Yorkers Kamaldeep Gandhi and Krishna Mohan and Chinese citizen Yuchun (Bruce) Mao – engaged in a scheme to defraud other market participants from about March 2012 to December 2013. The traders fraudulently placed orders to buy and sell equity index futures contracts with plans to cancel before execution, authorities said.
Gandhi pleaded guilty to two counts of conspiracy to engage in wire fraud, commodities fraud and spoofing in 2018. Mohan pleaded guilty to one count of conspiracy to engage in wire fraud, commodities fraud and spoofing, also in 2018. Both are scheduled for sentencing in February 2020.
“Tower is deeply disappointed by the conduct of the three former employees named in this case, each of whom left the firm nearly six years ago,” a spokesman said in an emailed statement, noting the company has cooperated with investigators.