The Commodity Futures Trading Commission (CFTC) has issued two orders filing and settling charges against Victory Asset (Victory) and Michael D Franko for spoofing – bidding or offering with the intent to cancel the bid or offer before execution – and the use of a manipulative scheme.
The scheme involved both domestic and international markets and occurred from at least May 2013 to July 2014. One aspect of scheme involved cross-market spoofing – spoofing in one market to benefit a position in another market, where the price of the two markets is generally correlated, particularly in the short term. Franko is a trader who resides in New Jersey.
CFTC Director of Enforcement James McDonald (pictured), says: “Today’s Orders show that the Commission can and will pursue spoofing and manipulation that stretches across different markets. I would like to thank the United Kingdom’s Financial Conduct Authority, the CME Group, Inc, and the London Metal Exchange (LME) for their assistance in this case. Today, we highlight that, together, we will protect our markets from manipulative activities that cross different exchanges, markets, and even international boundaries.”
The two CFTC Orders require Victory and Franko to pay civil monetary penalties of USD1.8 million and USD500,000, respectively, and to cease and desist from violating the Commodity Exchange Act’s prohibition against spoofing and the Act’s and CFTC Regulation’s prohibition against the use of a manipulative scheme. The CFTC Order against Franko further bans Franko from trading in US futures markets for a period of six months.
