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Business

Feds charge eight individuals, three banks in ‘spoofing’ probe

By
Kevin Dugan
Published Jan. 29, 2018
Updated Jan. 29, 2018, 10:37 p.m. ET

Federal regulators and law enforcement officials on Monday fined three European banks — and arrested eight traders — for “spoofing.”

“Shall we spoof,” one boneheaded trader asked another in a 2011 chat room, according to an order from the Commodity Futures Trading Commission.

“Sure,” the accomplice replied.

Spoofing, which is illegal, is when a trader places thousands of bids to buy or sell a stock for the sole purpose of moving the stock.

The orders are then quickly canceled.

In Monday’s action, traders at Deutsche Bank, HSBC and UBS are accused of spoofing futures contracts on major stock indexes like the S&P 500 and Nasdaq going back to 2008, according to the complaint.

The case marks the largest crackdown on spoofing since it was made illegal in 2010. It is a growing problem as traders rely more and more on algorithms to execute trades.

The case against the banks was settled on Monday without any of them admitting or denying guilt. They paid a total of $46.6 million in fines.

The Justice Department and FBI charged the traders criminally with fraud and deceptive market practices.