CFTC charges precious metals futures traders with spoofing

The United States Commodity Futures Trading Commission (CFTC) has earlier today announced the launch of a civil action against precious metals traders Michael Nowak, of New Jersey, and Gregg Smith, of New York. They have been charged with spoofing, engaging in a manipulative and deceptive scheme, and attempting to manipulate prices in the precious metals futures markets while employed at a major US bank.

According to the CFTC complaint, from at least 2008 and continuing through at least 2015, Nowak and Smith repeatedly engaged in manipulative or deceptive acts and practices by spoofing (bidding or offering with the intent to cancel the bid or offer before execution) while placing orders for and trading precious metals futures contracts on CME Group Inc.’s exchanges. The defendants are alleged to have placed thousands of orders with the intention to cancel them in order to send false signals of increased buying or selling interest designed to trick market participants into executing the orders the defendants wanted filled. The complaint also alleges that Nowak and Smith engaged in spoofing with the intent to manipulate market prices and create artificial prices, and thereby enable their orders to be filled sooner, at a better price, or in larger quantities than they otherwise would.

According to the complaint, the defendants were aware other traders at the bank were also spoofing, and Smith taught other traders at the bank how to spoof.

The US regulator seeks, inter alia, civil monetary penalties, disgorgement, restitution, trading bans, and a permanent injunction against future violations of the federal commodities laws.

Also today, a criminal indictment brought by the Department of Justice (DOJ) against traders including Nowak and Smith was unsealed in the U.S. District Court for the Northern District of Illinois.