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Three European banks to pay $46.6 million for ‘spoofing’ and manipulation

Deutsche-Bank-Frankfurt-am-Main

© Raimond Spekking/CC BY-SA 4.0 via Wikimedia Commons

Three banks and eight former traders, some of whom worked for the banks, are being charged following an investigation of manipulating precious metals futures market trading.

In addition, eight people who allegedly took part in precious metals market manipulation were charged with federal crimes, according to the U.S. Department of Justice. Five of the traders worked for global financial companies, two worked for commodities trading firms, and one owned a technology consulting firm.

Conspiracy, wire fraud, commodities fraud, and spoofing were included in the charges.

Spoofing is an illegal practice of placing an order for a futures contract that the trader never intended to be executed. The orders are often cancelled almost immediately after they’re placed – frequently within seconds – and are never filled.

Deutsche Bank AG and its Deutsche Bank Securities Inc. are being required to pay a $30 million civil penalty and to undertake remedial relief, the Commodity Futures Trading Commission said. Some traders engaged in a scheme to manipulate the price of precious metals futures contracts by using manual spoofing techniques and by trading to trigger customer stop-loss orders. 

UBS will pay a $15 million civil penalty and undertake remedial relief for the acts of precious metals traders who attempted to manipulate the price of precious metals futures contracts by using spoofing techniques.

HSBC agreed to pay a civil penalty of $1.6 million, to stop violating the laws against spoofing, and to take steps to strengthen their training, systems, and controls to detect and deter spoofing by HSBC employees in the futures markets.

“The alleged conduct in these cases once again reflects a disturbing and reckless trend of individuals and companies seeking to put illicit gains and profits above honest and law abiding conduct – and by doing so, harming innocent investors and putting the very integrity of our financial markets at risk” said Acting Assistant Attorney General John P. Cronan.

The U.S. Department of Justice handled the criminal charges against the eight individuals.

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