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CFTC will not prosecute former Citigroup traders for spoofing

First Published 3rd July 2017

The Commodity Futures Trading Commission (CFTC) has decided not to prosecute three former Citigroup traders in return for their cooperation with an investigation into spoofing in US Treasury futures.

This is cold comfort for the bank itself, which in January paid a fine of 25 million USD related to the traders' actions. The bank was censured by the CFTC for inadequate supervision of its staff and for failing to implement systems that would have detected their spoofing.

According to the regulator, the traders, Jeremy Lao, Shlomo Salant and Daniel Liao, "readily admitted their own wrongdoing, identified misconduct of others and provided other valuable information which expedited our investigation and strengthened our cases against the other wrongdoers".

Though the CFTC made no mention of who those other "wrongdoers" are, two other Citigroup traders, Stephen Gola and Jonathan Brims, were fined by the agency in March and temporarily banned from futures trading. That enforcement action revealed that between July 2011 and December 2012 Gola and Brims had spoofed CME UST futures more than 1,000 times. Their strategy involved placing bids or offers of 1,000 lots or more, while placing smaller orders on the opposite side of the book in either futures or cash markets. They "coordinated with one or more Citigroup traders on the US Treasury Desk" who "would place spoofing orders to benefit smaller resting orders of Gola and Brims".

Though "non-prosecution" agreements have been used by the SEC and DoJ, this is a first for the CFTC. The director of enforcement at the regulator has indicated that the agreements will be used again "to reward extraordinary cooperation in the right cases, while providing individuals and organizations strong incentives to […] cooperate with the division's investigation".

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