DOJ seeks to postpone sentencing of Australian trader accused of spoofing

Maria Nikolova

Jiongsheng “Jim” Zhao is cooperating with the government’s investigation.

The United States Department of Justice (DOJ) is seeking a continuance in the case against Jiongsheng “Jim” Zhao – an Australian trader accused of spoofing. This is indicated by documents filed by the DOJ with the Illinois Northern District Court on November 18, 2019.

The government now seeks to continue by approximately six weeks the date for the sentencing hearing. The defendant is cooperating with the government’s investigation, and the government anticipates needing additional time to evaluate Zhao’s cooperation. Accordingly, the government seeks a continuance of the sentencing hearing to January 28, 2020.

The defendant does not oppose the government’s request for a continuance.

In December 2018, Zhao pleaded guilty to spoofing charges.

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 Government believes that the spoof orders placed by the defendant may have affected hundreds of counterparties and other market participants—all potential crime victims—that traded E-Mini S&P 500 futures contracts while the Spoof Orders were pending in the market.

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