Chicago, IL – Brett Falloon and his firm, Flatiron Futures Traders LLC, have been slapped with penalties by the Commodity Futures Trading Commission (CFTC) for engaging in a manipulative trading practice known as spoofing. The CFTC announced the settlement on Tuesday, alleging the illegal activity occurred between May and December 2022 within the E-mini S&P 500 and E-mini Nasdaq 100 futures markets on the Chicago Mercantile Exchange.
The order details a scheme where Falloon allegedly placed bids and offers with no intention of executing them, but rather to create a false impression of market demand and supply. These “spoof” orders were systematically canceled before they could be filled. According to the CFTC, Falloon would layer these deceptive orders alongside genuine trades, manipulating the market to his advantage.
Investigators found that Falloon’s strategy involved placing aggressive, immediately-filled orders on one side of the market while simultaneously entering spoof orders on the opposite side. Once the legitimate orders were executed, the spoof orders were swiftly canceled. The volume of spoof orders significantly outweighed legitimate orders, with a 5-to-1 ratio, suggesting a deliberate attempt to mislead other traders.
The CFTC alleges that this manipulation induced other market participants to react to the false signals, either by crossing the bid-ask spread to fulfill Falloon’s genuine orders or by placing their own orders at unfavorable prices. This allowed Falloon to execute his trades more quickly, in larger quantities, and at better prices.
As a result of the settlement, Falloon and Flatiron Futures Traders LLC will jointly pay a $200,000 civil monetary penalty. Additionally, Falloon is barred from trading commodity interests for a period of 12 months. Both parties are required to cease and desist from any further violations of the spoofing prohibition outlined in the Commodity Exchange Act.
The CFTC acknowledged the assistance of CME Group Inc. in the investigation. The case was led by Michelle Bougas, Patrick Marquardt, Brian Hunt, Kathleen Banar, and Paul Hayeck of the Division of Enforcement, with contributions from former staff Erica Bodin and Deputy Director Rick Glaser.
Source: CFTC.gov
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