Illinois Court agrees to stay proceedings against Australian trader accused of spoofing
Judge Sara L Ellis has agreed to stay the proceedings against Jiongsheng Zhao, as the CFTC needs more time to obtain service on the trader.
Judge Sara L Ellis of the Illinois Northern District Court has granted a Motion by the Commodity Futures Trading Commission (CFTC) to stay the proceedings against Jiongsheng Zhao, an Australian trader, accused of spoofing and engaging in a manipulative and deceptive scheme.
In a minute entry, the Honorable Sara L. Ellis reset the hearing initially set for March 22, 2018 to June 28, 2018, in line with the request by the CFTC.
In February this year, the CFTC informed the Court it needed more time to obtain service on Zhao. It explained back then that it anticipates service to occur within the next thirty to forty-five days. However, such service requires assistance from third parties because Mr Zhao is a resident of Australia, is in police custody in Australia, and is awaiting extradition to the United States in connection with a criminal case filed against him in this Court.
The request demonstrates the various difficulties that US regulators encounter when they try to prosecute foreign nationals.
The United States expects that the extradition proceedings will likely continue for more than sixty days.
In its Complaint, the CFTC alleges that from at least July 2012 through at least March 2017, Zhao repeatedly engaged in manipulative or deceptive acts in the E-mini S&P 500 futures contract market on the Chicago Mercantile Exchange (CME). Zhao is alleged to have employed a practice known as “spoofing” (bidding or offering with the intent to cancel the bid or offer before execution). He 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.
Zhao is alleged to have engaged in the deceptive pattern approximately 2,300 times, which included 3,100 discrete instances of spoofing.
The CFTC is seeking civil monetary penalties, disgorgement of ill-gotten gains, trading and registration bans, and a permanent injunction against further violations of the federal commodities laws.
The case is captioned Commodity Futures Trading Commission v. Zhao (1:18-cv-00620).
