in Newswire Published on October 24, 2018

Three Futures Traders Facing Lawsuit Over Alleged Market ‘Spoofing’

Boutchard v. Gandhi et al

Filed: October 19, 2018 ◆§ 1:18cv7041

A lawsuit claims three futures contract traders and the firms that employ them unlawfully manipulated the prices of E-mini Dow Futures contracts, E-mini S&P 500 Futures contracts, and E-mini NASDAQ 100 Futures contracts for a period of over two years.

Defendant(s)

Tower Research Capital LLC

Law(s)

State(s)

Illinois

Categories

Securities

A lawsuit has been filed against three futures contract traders and the firms that employ them over the individuals’ alleged practice of “spoofing” the futures contract market. More specifically, the case claims the defendants unlawfully manipulated the prices of E-mini Dow Futures contracts, E-mini S&P 500 Futures contracts, and E-mini NASDAQ 100 Futures contracts between March 1, 2012, and October 31, 2014, harming those who traded on the market during that time.

The lawsuit explains that “spoofing” is an illegal method used by traders to manipulate the prices of futures contracts – agreements “for the purchase and sale of a particular commodity at a specified price at a specified time in the future.” According to the case, spoofing is accomplished when traders place large orders to buy or sell futures and then cancel the orders before they are filled. From the complaint:

“For example, a trader engaged in spoofing prices lower will place an order to buy futures contracts at a price below the lowest ask price then available in the market, i.e., a price lower than where any market participant would be willing to sell. The trader will then place one or more large orders—orders the trader never intends to execute—to sell a substantial amount of the same contract on the opposite side of the market, i.e., at a price that is at or above the lowest ask price available in the market. These large orders signal that investors are selling their futures contracts, causing prices to decrease, in response to the apparent increase in supply, toward the price at which the trader entered their initial buy order. These large orders are cancelled before they are filled, as the trader intended when the orders were placed, so the trader never enters a transaction at that price level.”

The lawsuit argues that the defendants’ spoofing allowed them to make a profit by buying futures below market prices and selling them above market prices, which, in turn, caused harm to other investors trading at artificial prices during the same time period.

According to the suit, the individual defendants—Kamaldeep Gandhi, Yuchun Mao, and Krishna Mohan—are facing criminal charges brought by the U.S. Department of Justice in October 2018 over their alleged “spoofing” scheme.

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