End of US Govt shutdown prompts resumption of CFTC action against traders accused of spoofing

The work of the Commodity Futures Trading Commission (CFTC) was heavily affected by the United States Government shutdown, leading to a halt in a number of lawsuits brought by the regulator. The shutdown has also had its impact on several CFTC actions against traders accused of spoofing, as FinanceFeeds has earlier reported.

Given the end of the Government shutdown, however, the proceedings may now resume. The relevant orders were issued on Monday, January 28, 2019, by the Illinois Northern District Court.

In the case against Jiongsheng Zhao, the Honorable Ruben Castillo signed an order stating that, given that appropriations having been restored to fund the Department of Justice and other Executive Branch agencies, with employees beginning to report for work beginning on January 28, 2019, it is ordered that the stay in the case is lifted. Any deadlines in the affected civil litigation, including but not limited to any scheduled discovery and pleading dates, are extended by 42 days.

Zhao, of Australia, has been charged with spoofing and engaging in a manipulative and deceptive scheme in the E-mini S&P 500 futures contract market on the Chicago Mercantile Exchange (CME).

The CFTC Complaint alleges that from at least July 2012 through at least March 2017, Zhao 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). On thousands of occasions, Zhao 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.

In the case targeting James Vorley, a U.K. resident, and Cedric Chanu, a United Arab Emirates resident, the stay was also lifted, as the US Government resumed its work.

The CFTC Complaint alleges that beginning in at least May 2008 and continuing through at least July 2013, while employed at a large financial institution, Vorley and Chanu engaged in a manipulative and deceptive scheme while placing orders and trading in the precious metals futures markets on a registered entity. Specifically, in furtherance of the scheme, Vorley and Chanu 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). On numerous occasions, Vorley and/or Chanu placed orders for COMEX gold, silver, platinum or palladium futures contracts that they wanted to get filled (Genuine Order) and entered orders for the same contract on the opposite side of the market that they intended to cancel before execution (Spoof Order).

In placing these Spoof Orders, Defendants Vorley and Chanu intentionally or recklessly sent false signals of increased supply or demand to trick market participants into executing against the Genuine Orders Vorley and Chanu wanted to get filled. Vorley and Chanu also engaged in spoofing in coordination with other traders on the precious metals desk and taught another trader on the desk how to spoof.