Futures Trader Banned After Pleading Guilty to 'Spoofing' -- Update
June 02 2017 - 2:35PM
Dow Jones News
By Dave Michaels and Alexander Osipovich
WASHINGTON -- A former futures trader at Deutsche Bank AG was
permanently barred from the industry after admitting he conspired
to manipulate the price of gold and silver futures contracts.
David Liew, a trader who was based in Singapore, also pleaded
guilty in federal criminal court in Illinois on Thursday to using
illegal spoofing techniques from 2009 to 2012. Regulators and
prosecutors have cracked down on spoofing, which involves sending
fake offers intended to push prices in a direction that benefits
the trader's other orders. Congress made it illegal through the
2010 Dodd Frank financial overhaul law.
Mr. Liew manually placed hundreds of orders on an electronic
trading platform operated by CME Group Inc. that were intended to
trick other market participants into altering their prices,
according to a plea agreement in his criminal case. Mr. Liew
coordinated with other traders at his bank and was taught by other
metals traders at the bank how to spoof, according to court
documents.
Mr. Liew carried out his trades on CME's Comex division, a major
venue for precious-metals futures trading. In May, an average of
about 289,000 of the flagship Comex gold futures contracts and
87,000 of the main Comex silver contracts changed hands each day,
according to data on CME's website.
According to one chat cited by the Commodity Futures Trading
Commission, Mr. Liew told a trader at another bank that he "sold
out...by just having fake bids." The CFTC said in its order that
Mr. Liew pushed silver prices down to benefit the other trader's
positions.
In another instance, the same trader asked Mr. Liew, "yo, can u
help me push silver down?" Mr. Liew then helped accomplish that,
triggering other customers' "stop loss" orders that are filled only
when a price moves a predetermined percentage. Mr. Liew then bought
back silver contracts at the lower price, cutting his exposure and
generating a profit, the CFTC's order said.
A lawyer for Mr. Liew didn't immediately respond to a request
for comment.
Neither court documents nor the CFTC's order identified Mr.
Liew's employer, but people familiar with the matter said he worked
for Deutsche Bank in Singapore.
The Wall Street Journal reported in 2015 that U.S. officials
were investigating at least 10 major banks for possible rigging of
precious-metals markets.
Mr. Liew was a junior trader who joined his employer in 2009
after earning his undergraduate degree. He started at the bank in
its global analyst program and was later assigned to the metals
trading desk.
The criminal charges to which Mr. Liew pleaded guilty this week
carry a maximum sentence of five years in prison and a fine of
$250,000, according to court documents.
The CFTC regulates futures trading in the U.S. and reached an
agreement with Mr. Liew to ban him from trading commodities or
futures. The CFTC's order didn't impose a fine on Mr. Liew because
he cooperated with its investigation, indicating his information
could be beneficial to regulators and prosecutors if they pursue
other traders involved in the scheme.
Write to Dave Michaels at dave.michaels@wsj.com and Alexander
Osipovich at alexander.osipovich@dowjones.com
(END) Dow Jones Newswires
June 02, 2017 15:20 ET (19:20 GMT)
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