Two bank precious metals traders have pleaded guilty to spoofing charges brought by US authorities. Former JP Morgan trader John Edmonds and former Scotia Capital trader Corey Flaum both entered into cooperation agreements with the US government and admitted to spoofing and manipulative conduct in futures markets. Flaum also admitted guilt to a related US Department of Justice charge.
An Order filed and settled by the US Commodity Futures trading Commission (CFTC) says that Flaum engaged in a pattern of spoofing in the precious metals futures market between 2007 and 2016 while employed at a New York bank and subsequently at the New York office of another bank. Flaum worked at Scotia Capital from 2010 to 2016 according to FINRA records, he joined te bank after leaving Bear Stearns, for whom he worked for two years before that bank’s collapse in 2008.
The order requires Flaum to cease and desist from violating the Commodity Exchange Act and CFTC regulations prohibiting spoofing, the use of manipulative or deceptive devices in connection with futures contracts, and price manipulation and finds that he and others at the banks placed futures orders they intended to cancel before execution, for the purpose of creating false signals of buying or selling interest. “These spoof orders were placed to deceive other market participants into transacting against the orders Flaum and others wanted filled, at least in part for the benefit of the banks,” CFTC says, adding that it recognises Flaum’s entry into a formal cooperation agreement with the CFTC’s Division of Enforcement and, pursuant to that agreement, reserves the CFTC’s determination as to sanctions against him.
While the CFTC also brought and settled charges against Edmonds, he had previously admitted guilt in a Connecticut court in November 2018 to spoofing charges, however he too entered a cooperation agreement with the government.
The charges are just two of a raft of cases brought by the US authorities against spoofing in futures markets, with precious metals firmly in the spotlight. In January 2018, the CFTC brought charges against eight individuals and five banksand the intervening period has seen several more cases settled, although not all to the government’s side.
“Today’s enforcement actions send a clear message that spoofing and manipulation in our markets will not be tolerated and that the CFTC will use all of the tools in its arsenal to aggressively pursue individuals and entities who engage in this misconduct,” says James McDonald, CFTC’s Division of Enforcement. “These cases also show that, where an individual has demonstrated a commitment to cooperate, and has cooperated, the CFTC may elect to postpone the assessment of the co-operator’s sanctions until the cooperation is substantially complete.”