Australian trader pleads guilty to spoofing charges in US

Maria Nikolova

The Court allows Jiongsheng “Jim” Zhao to reside in Australia and to remain in Australia apart from when he is required to travel to and from the United States for court proceedings.

Australian trader Jiongsheng “Jim” Zhao has pleaded guilty to spoofing charges in a US criminal case. This becomes clear from the latest filings with the Illinois Northern District Court.

Zhao’s initial appearance and arraignment were held on December 26, 2018. The defendant was informed of his constitutional rights, the nature of the charges, and the potential maximum penalties. He waived his right to an Indictment and entered a plea of guilty to Count One (spoofing).

The terms of Zhao’s release were modified. He is allowed to reside in Australia and to remain in Australia apart from when he is required to travel to and from the United States for court proceedings. The defendant is barred from trading on any U.S. regulated exchange.

As per the charges, from at least 2012 through the present, Zhao was employed as a trader at Trading Firm A, which was a proprietary trading firm located in Sydney, Australia and elsewhere. As a trader at Trading Firm A, Zhao traded futures contracts, including the E-mini S&P 500 futures contract on the Chicago Mercantile Exchange (CME).

The US authorities allege that, as a part of Zhao’s spoofing conduct, beginning in approximately July 2012 and continuing through approximately March 2016, he devised, implemented, and executed a trading strategy involving E-Mini S&P futures contracts in which he entered large-volume orders he intended, at the time he placed the orders, to cancel before they could be filled by other traders and which were transmitted to the Globex electronic trading platform that operated on a CME Group server.

Also, under the charges, the Large Orders placed by Zhao were material misrepresentations that falsely and fraudulently represented to market participants that he wanted to trade the Large Orders when, in truth and in fact, he did not because, at the time he placed these orders, he intended to cancel them before they could be executed.

Zhao is alleged to have placed thousands of Large Orders for E-Mini S&P futures contracts in an effort to cause his Primary Orders to be filled at prices, quantities, and at times that they otherwise would not have. He placed Large Orders in order to make money and avoid losses for himself and Trading Firm A.

On January 29, 2018, Zhao was arrested by the Australian Federal Police and remanded into custody pending extradition. On November 19, 2018, after his extradition to the United States, Zhao made an initial appearance before Magistrate Judge Young B. Kim. Zhao was initially held in custody pending a detention hearing, but was released on conditions on November 26, 2018.

The sentencing hearing is set for July 19, 2019.

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