CFTC releases annual enforcement results for 2015
Enforcement Program Highlights Fiscal Year 2015:
Spoofing and Manipulation, Attempted Manipulation
Two of the important new authorities Congress provided the CFTC in the Dodd-Frank Act were statutory tools to fight manipulation and the market-disrupting tactic of “spoofing,” defined as entering an order with the intent to cancel it before it is consummated in a complete transaction. This year, the CFTC has used these tools in its efforts to ensure market integrity.
· Navinder Singh Sarao and his company Nav Sarao Futures Limited PLC were charged with manipulation, attempted manipulation, and spoofing with regard to the E-mini S&P 500 futures contracts over a five-year period, including on May 6, 2010, during which the Defendant’s alleged misconduct contributed to the market conditions that led to the “Flash Crash.” On April 21, 2015, the CFTC and the DOJ unsealed previously filed Complaints against Sarao, who was arrested in his home in London, and Sarao is currently fighting extradition to the United States. According to the CFTC’s Complaint, from April 2010 to April 2015, Sarao netted over $40 million from his E-mini S&P trading.
· Kraft Foods Group, Inc. and Mondelēz Global LLC were charged, respectively, with manipulation and attempted manipulation of the prices of cash wheat and wheat futures; they allegedly earned over $5.4 million in profits from their illicit trading strategy. The complaint also alleges that Kraft and Mondelēz held wheat futures positions in excess of speculative position limits without a valid hedge exemption or a bona fide hedging need, and engaged in numerous noncompetitive trades. As with the Sarao matter, discussed above, the manipulation charges were, in part, brought using the CFTC’s new fraud-based anti-manipulation authority under the Dodd-Frank Act and the CFTC’s implementing rules.
· Heet Khara and Nasim Salim were charged with engaging in unlawful disruptive trading practices in the gold and silver futures markets, specifically by “spoofing” over several months in early 2015.
· Eric Moncada and proprietary trading firms BES Capital LLC and Serdika LLC settled charges of attempted manipulation through “spoofing” orders, fictitious, and non-competitive transactions in the wheat futures market. After the Enforcement Division persuaded the court to grant summary judgment against Moncada on the charges of fictitious sales and non-competitive transactions, the parties settled the attempted manipulation charges with a $1.56 million civil monetary penalty, afive-year wheat futures trading ban, and one-year bans on registration and trading of other products. Per the consent order, Moncada attempted to manipulate the wheat futures market by entering and cancelling large lot orders without the intent to fill the orders. In FY 2014, the CFTC also obtained default judgments against the firms with civil monetary penalties totaling $32.24 million and permanent trading and registration bans.