CFTC Settles Spoofing Case with Indian-American Trader

Krishna Mohan was accused of working with other traders to rig the futures contracts on the Chicago Mercantile Exchange.

An Indian-American trader has just settled spoofing charges with the Commodity Futures Trading Commission (CFTC). The CFTC action centered on spoofing activity carried out by Krishna Mohan, 34, of New York in a scheme that ran from March 2012 through March 2014 and involved dozens of fraudulent orders that were canceled before execution.

Krishna Mohan was accused of working with two other traders to rig the purchase and sale of futures contracts on the Chicago Mercantile Exchange and the Chicago Board of Trade.

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The charges against the trio were part of a broad U.S. crackdown on spoofing, a tactic in which traders place orders without intending to execute them to try to move prices in their favor.

Earlier last year, Deutsche Bank, HSBC, and UBS were hit by penalties, the largest of which was a $30 million fine for Germany’s biggest bank. The Swiss bank UBS has also found itself facing similar accusations after some of its spot traders used phony trade orders to manipulate precious metals futures traded on the COMEX. The bank agreed to pay a penalty of $15 million to settle the ‘spoofing’ charges brought by the US Commodity Futures Trading Commission.

HSBC Securities, the bank’s US brokerage arm, was fined around $1.6 million on related charges, a relatively small penalty compared to other sanctions doled out in other banks’ rigging cases.

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No monetary sanctions, but…

In addition to the three banks, the multi-agency complaint accuses Krishna Mohan and other plotters of engaging in a plot to rip off other metals traders by spoofing.

The settlement approved today with Mohan included a trading ban for three years, also requiring him to continue to cooperate with the CFTC in its ongoing investigation.

“In the Order, the CFTC reserves its determination as to monetary sanctions against Mohan in recognition of Mohan’s agreement Division pursuant to the cooperation agreement,” the agency said.

Spoofing, in general, is a practice in which a trader floods the market with fake orders by entering and quickly canceling large buy or sell orders on an exchange, in order to fool other traders into thinking that the market is poised to rise or fall.

Regulators and exchanges have stepped up their policing of spoofing in recent years. However, the people and firms that they previously focused on were rather small-time.

James McDonald, the Director of Enforcement, commented: “Today’s enforcement action again demonstrates the CFTC’s continued emphasis on pursuing individuals who spoof in our markets.  This action also reflects some of the tools we can bring to bear in rooting out misconduct in our markets. As has been shown recently and again shown here, in certain cases under the Division’s cooperation program, where an individual has demonstrated a commitment to cooperate and has cooperated, the Commission may elect to postpone the evaluation and assessment of monetary sanctions until cooperation is substantially complete.”

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