Australian trader accused of spoofing seeks more time to respond to CFTC complaint

Maria Nikolova

Jiongsheng Zhao, who has been incarcerated in Australia, says the conditions of his confinement make it very difficult for him to communicate with counsel in the United States.

Jiongsheng (“Jim”) Zhao, an Australian trader accused of engaging in an illicit trading practice known as “spoofing”, is seeking more time to prepare his response to the complaint filed against him by the United States Commodity Futures Trading Commission (CFTC).

On Tuesday, October 9th, the defendant filed a Motion with the the Illinois Northern District Court, asking for an extension of his time to reply to the CFTC allegations against him until November 8, 2018. This is Zhao’s first request for an extension of his time to respond to the Complaint.

Zhao has been incarcerated in Australia at the request of the United States Department of Justice since January 29, 2018 as he awaits extradition and an opportunity to formally respond to related criminal charges advanced against him by the DOJ.

”Currently, the conditions of Mr. Zhao’s confinement make it very difficult for him to communicate with counsel in the United States”, the document says.

In addition, Zhao says he has been preoccupied with the criminal charges advanced against him, and has not had an opportunity to evaluate the CFTC Complaint and confer with counsel regarding an appropriate response.

In its Complaint, the CFTC alleges that from at least July 2012 through at least March 2017, Zhao repeatedly engaged in manipulative or deceptive acts in the E-mini S&P 500 futures contract market on the Chicago Mercantile Exchange (CME). Zhao is alleged to have employed a practice known as “spoofing” (bidding or offering with the intent to cancel the bid or offer before execution). He placed an order that he wanted to execute and thereafter entered a larger order on the opposite side of the market that he intended to cancel before execution. In placing these larger spoof orders, Zhao intentionally or recklessly sent false signals of increased supply or demand designed to trick market participants into executing against the orders he wanted filled.

Zhao is alleged to have engaged in the deceptive pattern approximately 2,300 times, which included 3,100 discrete instances of spoofing.

The CFTC is seeking civil monetary penalties, disgorgement of ill-gotten gains, trading and registration bans, and a permanent injunction against further violations of the federal commodities laws.

The case is captioned Commodity Futures Trading Commission v. Zhao (1:18-cv-00620).

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