Sentencing of Australian trader accused of spoofing gets postponed

Maria Nikolova

Following a request by the Department of Justice, the sentencing of Jiongsheng “Jim” Zhao is rescheduled for February 4, 2020.

The Illinois Northern District Court has agreed to postpone the sentencing of Jiongsheng “Jim” Zhao – an Australian trader accused of spoofing.

On November 19, 2019, the Honorable John J. Tharp, Jr. set the sentencing of Zhao for February 4, 2020. The Judge granted the request by the Department of Justice (DOJ) for the postponement of the sentencing.

The government sought to continue by approximately six weeks the date for the sentencing hearing. The DOJ explained that the defendant was cooperating with the government’s investigation, and the government anticipates needing additional time to evaluate Zhao’s cooperation.

In December 2018, Zhao pleaded guilty to spoofing charges.

According to 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 estimates that the spoof orders placed by Zhao may have affected hundreds of counterparties and other market participants that traded E-Mini S&P 500 futures contracts while the spoof orders were pending in the market.

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