The financial markets watchdog in Australia, ASIC, announced today that it has commenced proceedings in the Federal Court of Australia against Whitebox Trading Pty Limited and its sole director Johannes Boshoff.
The move follows an investigation into the spike in prices of securities comprised in the S&P/ASX 200 Index (Index Securities) that occurred on 18 October 2012.
Along with other market misconduct, the Australian watchdog alleges that it was likely that artificial prices for trading Index Securities were created by order activities from Mr Boshoff and Whitebox on 18 October 2012, as well as on four earlier occasions in the same year.
ASIC also alleges that orders which both parties had placed through ASX, yet did not intend to trade, had created false or misleading appearances as to the market for Index Securities. This could be considered a form of spoofing,
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On October 18 2012, trading activities pushed up the price of ANZ shares by 6.5 percent after the opening bell prior to plunging straight down again, with about one-third of the average daily volume changing hands within the first few minutes of trading. At the same time, large spikes also pushed up the share prices of Commonwealth Bank and Bank of Queensland shares in early trades.
Whitebox had been contracted to provide index arbitrage trading software and services to the National Australia Bank (NAB) and the relevant order activities were conducted by Whitebox’s trading personnel, including Mr Boshoff, while providing those services. On 23 December 2013, ASIC accepted an enforceable EU undertaking from NAB in relation to its responsibility for the alleged market misconduct of Whitebox’s trading personnel.
ASIC is seeking declarations that Mr Boshoff and Whitebox contravened the law and that they pay penalties, together with a restraining order from providing financial services for an agreed period.
The news mirrors a similar case several years ago in which a UK trader was accused over the Wall Street ‘flash crash’ and who now faces a US extradition hearing. British trader Navinder Singh Sarao was arrested in April 2015 at the request of US authorities who said he helped cause market panic in 2010 from his parents’ home in London. Sarao now faces 22 charges including wrie fraud, commodities fraud and market manipulation carrying sentences totalling a maximum of 380 years.