New York Precious Metals Traders: Real Trades Behind False Orders

Precious metals traders at Bank of America Merrill Lynch placed orders they meant to cancel, moving prices toward trades they meant to fill. The Seventh Circuit’s opinion in the Justice Department’s criminal case describes the scheme: visible orders moved the market, genuine orders traded on the opposite side, and messages explained the connection.

The traders worked together on Bank of America Merrill Lynch’s precious metals desk in New York during 2010 and 2011. The Seventh Circuit’s opinion on the spoofing appeal describes their trading on COMEX and NYMEX through CME’s electronic platform, Globex. It connects the public order book to the decisions behind it: which orders the traders intended to execute, which they intended to cancel, and how the false orders helped the real trades make money.

Can the Commodity Market Be Manipulated?

Yes. This precious metals case shows how traders manipulated a futures market by presenting false buying or selling interest to other participants. The court described spoofing orders on the opposite side of genuine trades, with cancellations following the fills the traders wanted. The visible interest helped create the price at which the genuine trade could happen.

An iceberg order displays only part of the full quantity available to trade. In the trading sequences described by the court, a trader placed an iceberg sell order above the prevailing market price, then submitted visible buy orders that pushed the price higher. Once the market reached the intended sale price, the iceberg sell order filled and the visible buy orders disappeared.

The coordination could run in the other direction. One trader placed an iceberg buy order while the other flooded the market with sell orders intended for cancellation. The apparent selling pressure pushed the price down and helped the buy order fill. Reading the activity of either trader alone would leave out the connection between the price-moving orders and the intended purchase.

That is the unfairness we see in this form of commodity market manipulation. Other participants made trading decisions against apparent supply or demand that the defendants had manufactured for their own benefit. The order that disappeared had already served its purpose by helping another order trade.

What Evidence Is Required to Prove Fraud?

In this criminal case, trading data, contemporaneous chats and witness testimony connected the order pattern to an intention to deceive. The court described evidence of iceberg orders followed by visible opposite-side orders, with the visible orders canceled immediately after the iceberg orders executed. Messages exchanged around the trading supplied the explanation for that sequence.

The Trades and the Messages Described the Same Plan

The prosecution presented chats in which the traders discussed orders “not intended to be executed” and their use to “push” and “move” the market price. Those messages connected what appeared in the order book with what the people placing the orders were trying to accomplish. They gave the timing of the cancellations a purpose: the genuine trade had obtained its fill, and the other orders had finished their job.

A cooperating colleague described participating in the practice with the defendants. He testified that they placed orders intended for cancellation to move the price to a desired level and that the orders put false information about supply, demand and trading intent into the market. The trading data showed the sequence, the chats described the purpose, and a person who worked with the traders explained how they carried it out.

What the Exchange and Bank Witnesses Added

CME witnesses testified that an order communicated an intention to buy or sell. Compliance officials from Deutsche Bank and Bank of America testified about policies prohibiting orders placed with the intent to cancel. The court described evidence that the defendants knew the policies and had received training on them.

For someone in compliance, the connection runs from a policy and its communication to the conduct on the desk. An insider’s account has value because it explains the conduct, even when that person cannot identify the rule governing it.

The Public Order and the Private Plan

Every order on the screen tells the market someone wants to trade. In the court’s account of this criminal scheme, these orders told the market a lie. The defendants’ genuine trades benefited from demand they had manufactured.

The court also reproduced a later Bank of America chat, following a supervisor’s email about a regulatory action. One trader described the reversal himself:

The defense used that message to argue that the trader believed his conduct was lawful. We see the absurdity: a description of doing the opposite offered as reassurance. The market saw a bid or offer, while the trader wanted the trade on the other side.

The opinion discusses a parallel criminal case involving precious metals traders at Deutsche Bank. Those traders placed their orders manually, intended to cancel them before execution and were convicted of wire fraud. The comparison matters to a desk insider because the same false signal can come from a person’s order entries as from programmed instructions. The evidence has to explain the decision behind the activity.

The Same Spoofing Pattern at a New Employer

The Justice Department’s account of the verdict records convictions for conspiracy to commit wire fraud and wire fraud against both traders. The additional charges produced different results. One trader was acquitted of commodities fraud. The other was convicted of commodities fraud and acquitted of the separately charged spoofing offense.

The commodities-fraud conviction concerned the latter trader’s activity at Morgan Stanley in 2014. The court described a colleague’s testimony that he saw the same kinds of spoofing trades there that he had seen at Bank of America. Trading data and the earlier evidence of intent helped connect the later conduct to the same fraudulent purpose.

The colleague did not directly describe that trader’s intent during the later period. The court explained that the jury could infer intent from the trading scheme, the earlier messages and the witness’s account of the repeated practice. That is a useful distinction for an insider whose knowledge spans a change of desk or employer: the sequence and the explanation can be connected across the move.

What an Insider Can See in the Order History

The useful order history includes the orders that remained unfilled and the orders that were canceled, alongside the completed trades. The industry’s transaction records and trading communications can connect instructions with the resulting activity. Timestamps, fills, communications and algorithm instructions help reconstruct the purpose of an order and the trade it was meant to serve.

The May 2016 Futures and Derivatives Law Report article The Exercise of Anti-Spoofing Authority in U.S. Futures Markets: Policy and Compliance Consequences describes the importance of market context and how orders fill. It also explains that examining spoofing involves order submissions, modifications, cancellations and executions, with market expertise needed to interpret the activity. That is the level of detail at which a desk’s explanation becomes useful.

The article also puts the harm in commercial terms. It explains that spoofing can lure market participants into losing trades or cause them to pass up profitable trades while trying to avoid the suspected activity. Traders and their customers bear that harm on the other side of the screen. The false orders disappear, but the trades they induced remain.

We connect the visible order to the genuine trade it helped, then examine the communications that explain why the sequence occurred. The strategy insider can explain the relationship between a cancellation and the fill on the other side. The systems insider can explain the instruction that caused it. Those accounts give the trading records a commercial meaning.

Surveillance brings another view. The 2024 working paper An Analysis of Market Manipulation Definitions Around the World, from a World Federation of Exchanges research project, describes automated systems flagging suspicious patterns for investigation by specialist analysts. It also identifies whistleblower reports as a source of detection and discusses examining communications alongside trading activity.

The analyst’s review and the insider’s explanation address the purpose behind the pattern. In this precious metals case, the criminal trial brought together records of trades, messages and a colleague’s account of the practice. That combination shows why someone who knows what the desk was trying to do can contribute information that an order history leaves unstated.

The Whistleblower Opportunity in Trading Evidence

In a separate civil action against Merrill Lynch Commodities, the Commodity Futures Trading Commission imposed an $11,500,000 civil monetary penalty. That order addressed alleged false buying or selling signals intended to get genuine orders filled, the same trading mechanism an insider would recognize here.

The Commission’s whistleblower program can pay qualifying whistleblowers an aggregate award of 10% to 30% of qualifying monetary sanctions collected. We assess how your knowledge of the orders, the desk’s communications and the intended trades can support a CFTC whistleblower matter. The records and your explanation belong together in that assessment.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. That is a separate program from the CFTC’s enforcement and award process. We work with you to identify the opportunity that fits the conduct you know.

Put Your Knowledge of the Desk to Work

If you know why the orders went up, why they came down or which trade they were meant to help, talk with our whistleblower experts about the desk activity you saw. We build the case with you and bring in commodities fraud whistleblower lawyers who understand precious metals trading and evidence of intent. We stay beside you as the trading story becomes a whistleblower matter, with your knowledge of the business at its center.