CFTC Charges Tennessee Trader and Two Entities with Engaging in Cross-Market and Single-Market Spoofing and Manipulative Schemes

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Regulatory and Legal News

April 14, 2022

Washington, D.C. — The Commodity Futures Trading Commission today filed a civil enforcement action in the U.S. District Court for the Northern District of Illinois against David SkudderGlobal Ag LLC, and Nesvick Trading Group LLC for spoofing—bidding or offering with the intent to cancel the bid or offer before execution—and for the use of manipulative schemes. The schemes involved both soybean futures contracts and options on soybean futures contracts traded on the Chicago Board of Trade. Some of their misconduct involved cross-market spoofingi.e., spoofing in one market to benefit a position in another market, where the price of the two markets is correlated. Skudder is a founder, principal, and registered associated person of Global, a registered commodity trading advisor. Skudder is also a registered associated person of Nesvick, a registered introducing broker.       

The CFTC seeks, among other things, monetary penalties, restitution, disgorgement, registration and trading bans, and a permanent injunction against further violations of the Commodity Exchange Act (CEA) and CFTC regulations.

“Through this action, the CFTC shows it continues to vigorously detect and prosecute spoofing and manipulation, including when actors attempt to obscure their misconduct by using different markets or financial products,” said CFTC Acting Director of Enforcement Vincent McGonagle. 

Case Background

The complaint alleges that from approximately September 2014 through March 2019 Skudder carried out his schemes by placing hundreds of large orders for soybean futures that he intended to cancel before execution (spoof orders) while placing orders on the opposite side in the soybean futures market, or cross-market in the options on soybeans futures market (genuine orders), that would benefit from market participants’ reactions to his spoof orders. By placing the spoof orders, Skudder allegedly deceived other traders about supply and demand, misleading market participants about the likely direction of the commodity’s price, which made Skudder’s genuine orders appear more attractive to market participants and allowed Skudder to execute his genuine orders in larger quantities and at better prices than he otherwise would have, absent the spoof orders.

This case is brought in connection with the CFTC Division of Enforcement’s Spoofing Task Force, and the staff members responsible are Nicholas Sloey, Clemon Ashley, Brandon Wozniak, Allison Sizemore, Jeff Le Riche, Jordon Grimm, Christopher Reed, and Charles Marvine.

Source: Commodity Futures Trading Commission

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