The US Commodity Futures Trading Commission (CFTC) has issued an Order filing and settling charges against Kamaldeep Gandhi, in which Gandhi admits to engaging in manipulative and deceptive schemes, along with other individuals, which involved thousands of acts of spoofing with respect to a variety of futures products traded on the Chicago Mercantile Exchange, Chicago Board of Trade, New York Mercantile Exchange, and the Commodity Exchange (Comex).
At the same time the US Department of Justice (DoJ) charged Gandhi and two alleged co-conspiritors, Bruce Mao and Krishna Mohan, with spoofing offenses and says Gandhi and Mohan have admitted to the charges.
The three men worked at proprietary trading firm Tower Research at the time, however the CFTC and DoJ merely refer to it as “Firm A”. Gandhi was also charged with a similar offence at a second unnamed firm. In 2017, Tower was itself, according to a release by the National Futures Association, found by the Comex Business Conduct Committee to have failed to ensure that its Tag 50 user ID registrations were current and accurate at all times and as such it had failed to supervise their use by its employees to make certain that its traders used a unique user ID to access CME’s Globex. The Committee’s finding was announced alongside sanctions against Gandhi and Mao for spoofing. Tower paid a small fine but neither admitted nor denied the allegations.
The CFTC Order finds that from at least September 2012 through October 2014, Gandhi, both individually and in coordination with the others, placed thousands of orders to buy or sell futures contracts with the intent to cancel those orders prior to execution. In doing so, the Order finds that Gandhi intentionally sent false signals of increased supply or demand designed to trick market participants into executing against the orders he wanted filled.
“Today’s enforcement action shows that the CFTC will continue to aggressively pursue individuals who spoof in our markets,” says James McDonald, director of enforcement at the Commission. “This action also serves as an example of the range of tools we can bring to bear in rooting out this misconduct. This includes the fact that, in certain cases under the Division’s enhanced cooperation program, the Commission may elect to postpone the evaluation and assessment of monetary sanctions until cooperation is substantially complete.”
The DoJ indictment alleges that Mao was co-head of a trading team that traded commodities on behalf of “Firm A”, working in Chicago and New York. It alleges that from in or around March 2012 through in or around March 2014, Mao and the others conspired to mislead the markets for E-Mini S&P 500 and E Mini Nasdaq 100 futures contracts traded on CME and E-Mini Dow futures contracts traded on CBOT. The indictment further alleges that market participants that traded futures contracts in these three markets while the spoof orders distorted market prices incurred market losses of over $60 million.
“As alleged in today’s charges, these individuals engaged in a sophisticated scheme to distort the futures market for their own advantage by placing large ‘spoofed’ trading orders that they never intended to execute,” says assistant attorney general Brian Benczkowski of the Justice Department’s Criminal Division. “Investor trust is the cornerstone of our trading markets, and the Criminal Division will aggressively investigate and prosecute those who undermine that trust by engaging in spoofing or any other illegal conduct.”