Two Fairfield County residents and a former commodities trader at the Stamford office of UBS were charged in a scheme that the U.S. Department of Justice called the largest futures market criminal enforcement action in the department's history.
While Deutsche Bank and UBS have agreed to pay $30m and $15m respectively to settle the civil charges in the case, HSBC will pay $1.6m, the CFTC said. Deutsche Bank will pay $30 million while UBS will pay $15 million of that total following an extensive investigation by the Commodity Futures Trading Commission (CFTC) that also names six individuals. He was said to have been based in London and employed as a precious metals trader at a leading global financial institution.
Those behind the spoofs are then alleged to have executed real orders to buy, at artificially low prices, or sell, at artificially high prices "in order to generate trading profits or to illicitly mitigate other trading losses", the DoJ said.
These "spoof orders" were said to have had the effect of artificially inflating or deflating prices of futures contracts traded on exchanges in Chicago.
"Spoofing is a particularly pernicious example of bad actors seeking to manipulate the market through the abuse of technology", said James McDonald, the CFTC's enforcement director.
HSBC Holdings (LON:HSBA) has agreed to pay $1.6 million over a "spoofing" probe in the US.
All three banks received reduced penalties from the CFTC for providing significant assistance in the investigations, which relate to activity that dates back as far as 2008. A spokesman for the Asia-focused bank told the newswire that the group was pleased to have resolved the matter.
Mr. Flotron's lawyer, Marc Mukasey, said the new case "is an especially enormous waste of taxpayers' money because the CFTC knows darn well that there is a pending criminal matter, that Mr. Flotron has always been retired from the business, and that he lives in Switzerland". Edward Bases, 55, and John Pacilio, 53, both of CT and based in New York City, were charged in a criminal complaint with commodities fraud.