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Eight individuals who allegedly engaged in various deceptive trading practices on commodities markets in the United States have been publicly charged with federal crimes.  Seven of the eight individuals were charged with the crime of spoofing, an illegal trading practice that can be used to manipulate the commodities markets.  Other than the individuals identified today, only three other individuals have ever been publicly charged with the crime of spoofing.  Of those identified today, five were traders employed by global financial institutions, two were traders at large commodities trading firms, and one was the owner of a technology consulting firm.

How Spoofing Can Work - Spoofer, Fake Orders, Futures Exchange, Fake Orders, Victims Defrauded, Victim Investors Buy or Sell at manipulated Prices, Victims' Orders Spoofer Profits from Trades

 The enforcement actions were announced by Acting Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division, Deputy Assistant Director Chris Hacker of the FBI’s Criminal Investigative Division and Director James McDonald of the U.S. Commodity Futures Trading Commission’s (CFTC) Division of Enforcement.

The charges announced today aggressively target, among other things, the practice of spoofing, which was allegedly employed in various forms by these defendants and/or their co-conspirators to manipulate the market for futures contracts traded on the Chicago Mercantile Exchange (CME), the Chicago Board of Trade (CBOT), and the Commodity Exchange Inc. (COMEX).  The defendants and their co-conspirators are alleged to have defrauded market participants and manipulated these markets by placing hundreds, and in some cases, thousands of orders that they did not intend to trade, or “spoof orders,” to create the appearance of substantial false supply and demand and to induce other market participants to trade at prices, quantities, and times that they otherwise would not have traded.  According to the charging documents, the spoof orders often had the effect of artificially depressing or artificially inflating the prices of futures contracts traded on CME, CBOT, and COMEX.  In order to take advantage of the artificial price levels created by their spoof orders, the defendants and/or their co-conspirators are alleged to have executed real, genuine orders to buy (at the artificially low prices) or to sell (at the artificially high prices) in order to generate trading profits or to illicitly mitigate other trading losses. Read more   

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