First Federal Case of Its Kind Unveils $1.4 Million “Spoofing” Scheme

CFTC Whistleblower Program

The conception of the Dodd-Frank Wall Street Reform and Consumer Protection Act has come to fruition in the uncovering of a large-scale commodities exchange scheme, resulting in an estimated loss of $1.4 million. This scheme directly violated the anti-spoofing provision of the Dodd-Frank Act, and is being called the first of its kind to be federally apprehended under this provision since the act went into effect.

“Spoofing” is a common fraudulent trading technique designed to create the illusion of heightened demand for a particular commodity, thus allowing the trader to profit from the manipulated market. To do so, a reasonable amount of genuine orders are placed on one side of the market and an exorbitant amount are placed on the other. This creates a false impression of supply and demand for the commodity in question and deceives investors into bidding on the genuine orders, after which the mass of fraudulent orders are rapidly cancelled or withdrawn.

In this case, the trader commissioned the development of algorithms that allowed for large quantities of these orders to be placed in milliseconds, with the sole intention of revoking them once the market had been effectively altered. Of the orders placed, over 90 percent of the larger ones were cancelled; by comparison, more than 40 percent of his smaller orders were filled.

During the investigation, it was found that the New Jersey trader had worked together with an array of outside gold, silver, platinum, and palladium traders to place these orders, and within three months in 2011, had reaped over $1.4 million in fraudulent profits. His scheme involved tens of thousands of these fraudulent trades in these and various other commodities markets, including soybean meal, soybean oil, high-grade copper, Euro FX and Pounds FX currency futures, primarily in the Asia-Pacific region. Through this blatant manipulation, he meaningfully disrupted market futures by causing others to buy or sell at times, prices, or quantities that they otherwise would not have.

The Dodd-Frank Act was conceived following the 2010 market crash that resulted in a loss of tens of billions of dollars in a matter of minutes. According to the federal investigation that followed, spoofing practices played a major role in this catastrophe as well. This act and the provisions within it were developed in order to maintain fairness and integrity in all trading markets, in efforts to protect investors from scams such as these. The enforcement of the act is vital to ensuring the longevity of appropriate and honest market function, as well as preventing future monetary casualties as a result of fraudulent schemes.

Whistleblower Justice Network Can Help You

Whistleblower Justice Network partners with whistleblowers worldwide to expose schemes that disrupt commodity futures prices. We believe in the protection of market integrity, and work together with whistleblowers who bring forward information to ensure that justice is served. Under the U.S. Commodity Futures Trading Commission (CFTC) Whistleblower Program, we we aid whistleblowers in bringing corporations that use deceptive tactics for personal gain to justice, while maintaining their anonymity and ensuring they file their best possible suit.

If you have meaningful information regarding commodities fraud that you believe is in violation of the Dodd-Frank Act, Whistleblower Justice Network can help. Working alongside world-class legal counsel, we will ensure you are protected to the fullest extent of the law and that you receive credit for the information you bring to the U.S. government. Partnering with whistleblowers is all we do. Visit us at www.whistleblowerjustice.net, or call us at 844-WJN-4ALL, to learn if we can help you.

Related Newsroom Content

  • CFTC’s $4.5 Million Win Against Commodity Pool Fraud Scheme

    The U.S. Commodity Futures Trading Commission (CFTC) saw a big win following their complaint against a Delaware-based investment company, resulting in the recoup of $4.5 million. The three-year scheme carried out by STA Opus and its primary owner, Gerard Suite, resulted in the loss of millions of dollars in customer funds, directly stemming from the […]

  • Bitcoin Futures Flourish Under CFTC Approval, but Danger Still Looms

    It is no secret that Bitcoin is on the rise; the cryptocurrency has gained a significant amount of momentum since its introduction to the market in 2009, popular for being the first digital currency that operates without a central bank. Though many seem to be under the impression that it is no more than a […]

  • Arizona Trader Pays $2.5 Million for Role in Commodity Pool Ponzi Scheme

    A commodity trading advisory company based out of Mesa, Arizona, as well as its proprietor, have been permanently banned from any future trading activity following a complaint by the U.S. Commodity Futures Trading Commission (CFTC), which unveiled an array of fraudulent practices that were regularly employed in attempts to execute the Ponzi-style scheme. Draven LLC […]