New York – Former bank trader Blaise Brochard has been penalized by the Commodity Futures Trading Commission (CFTC) for a scheme to manipulate the valuation of U.S. dollar interest rate derivatives, according to an order filed today.
The CFTC alleges that between January 2015 and April 2018, Brochard, while working at a global bank’s IRD (Interest Rate Derivatives) Desk, intentionally submitted false information into the bank’s internal accounting system. This false data concerned the daily marking of the USD LIBOR forward curve, a benchmark used in pricing derivatives. The intent, the CFTC claims, was to artificially inflate the desk’s reported profits and conceal significant trading losses.
The scheme involved manipulating the “Closing Curve” – the end-of-day valuation of the LIBOR forward – deviating from actual mid-market prices. Brochard reportedly aligned these manipulated values with the desk’s existing risk positions, carefully staying within the bank’s internal controls to avoid immediate detection. At its height in early 2018, the CFTC estimates Brochard’s mismarking overstated the IRD Desk’s profit & loss by approximately $25 million.
As part of the settlement, Brochard will pay a $250,000 penalty and is barred from trading commodity interests for or on behalf of others for three years. He is also required to cease and desist from violating provisions of the Commodity Exchange Act (CEA) and CFTC regulations.
The CFTC acknowledged Brochard’s “substantial cooperation” during their investigation, noting that this cooperation led to a reduced civil monetary penalty. The investigation also received assistance from France’s Autorité des marchés financiers and the National Futures Association (NFA).
“Mismarking schemes undermine the fairness and integrity of the markets, and we will vigorously pursue such misconduct and hold individuals accountable, where appropriate,” stated CFTC Acting Director of Enforcement Gretchen Lowe.
Source: CFTC.gov
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