US authorities on Monday (Jan 29) announced fines and charges against three major European banks and eight individuals accused of manipulating futures markets for precious metals.
Deutsche Bank, UBS and HSBC will together pay a total of US$46.6 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.
Seven former traders, including ex-UBS trader Andre Flotron, who was indicted last year, as well as a technology consultant, also face charges of “spoofing” – in which traders place and then abort trades to manipulate prices – on markets for various precious metals including gold and silver between early 2008 and about 2014.
The suspects were based in New York, Switzerland, Britain, Australia, the United Arab Emirates. Prior to this case, only three other people had been charged with the crime of spoofing, according to the Justice Department.
In actions brought by the CFTC, which regulates derivatives markets, Deutsche Bank suffered the largest penalty at US$30 million while UBS agreed to pay US$15 million and HSBC was fined US$1.6 million.
The suspects allegedly placed hundreds and sometimes thousands of fraudulent “spoof orders” to create the appearance of demand and cause other market players to trade at inflated prices or make moves when the would otherwise have held their positions.
“Conduct like this poses significant risk of eroding confidence in US markets and creates an uneven playing field for legitimate traders and investors,” John Cronan, the acting head of the Justice Department’s criminal division, said in a statement.
James McDonald, director of enforcement at the CFTC, which regulates derivatives markets, said electronic and algorithmic trading had created opportunities both for legitimate trading, which CFTC supported, and for fraud.
“We are equally committed to identifying and punishing these bad actors,” he said in a statement.
David Liew, a Deutsche Bank trader, pleaded guilty in June and has reportedly agreed to cooperate with prosecutors.