CFTC wants $660,000 fines to prove 3red Oystacher’s spoofing

The Commodity Futures Trading Commission has opened a law suit against 3Red Trading LLC and its Founder Igor Oystacher in October 2015, accusing him of spoofing – canceling orders just before entering them to trick traders by creating a false impression of demand – a practice made illegal since the Dodd-Frank Act in 2010.

While Oystacher’s defense argues that his skills at speed-chess and costumized trading equipment, including hardware, are behind his extraordinary speed at executing trades, the CFTC now wants to use his past court history as evidence: previous enforcement actions brought by CME Group Inc., Intercontinental Exchange Inc. (ICE), and Deutsche Boerse AG’s Eurex, have cost Oystacher $660,000 in fines.

The total figure came as the result of eight spoofing investigations conducted by the three claimants over a four-year period, in which the trader neither admitted nor denied wrongdoing. Should the federal court in Chicago accept it as evidence of pattern of intent, CFTC could be successful at accomplishing its goal of banning Oystacher from trading. A hearing on the issue is due on Monday, April 25.

The CFTC commented on the case: “The exchange spoofing evidence also counters the fiction that Oystacher was an innocent actor, trying his best to comply, who now unwittingly finds himself subject to the arbitrary whims of the commission. Oystacher professes that he had no idea or notice that his trading constituted spoofing, that he is committed to compliance, and that he conducted his trading strategy in good faith. Plainly speaking, these are brazen fabrications.”

Among witnesses the CFTC intends to call as witnesses are Karsten Hiestermann, Director of the Exchange Supervisory Authority of Hesse (which regulates Eurex), and 3Red COO Stephen Strohmer, and Edwin Johnson, co-founder of 3Red in a legal battle with Oystacher since 2014, exchanging accusations.

Johnson alleged that CME Executive Chairman Terry Duffy and ICE Chief Strategy Office David Goone knew about the spoofing and that assured that “Oystacher’s trading practices were legal and legitimate.”