Chicago, IL – Jiongsheng Zhao, a trader based in Australia, has been penalized by the Commodity Futures Trading Commission (CFTC) for engaging in spoofing and manipulation of the Chicago Mercantile Exchange E-mini S&P 500 futures market. The U.S. District Court for the Northern District of Illinois entered a consent order on June 4, 2021, resolving charges brought by the CFTC.
The order prohibits Zhao from trading in any commodity interests for a period of five years. He is also required to disgorge $21,000 and cease all violations of the Commodity Exchange Act (CEA) pertaining to spoofing and manipulation. The case originated from the CFTC’s Division of Enforcement’s Spoofing Task Force.
The CFTC initially filed a complaint against Zhao on January 28, 2018. A related case against Propex Derivatives Pty Ltd., the Australian proprietary trading firm Zhao worked for, was resolved in January 2020. According to the order, between July 2012 and March 2017, Zhao repeatedly utilized a technique known as “spoofing.” This involved placing orders with no intention of executing them, then layering larger orders on the opposite side of the market to create a false impression of supply or demand.
Investigators found that Zhao placed thousands of these deceptive orders, intending to cancel them before they could be filled. This practice was designed to manipulate other market participants into executing trades against his desired orders. The intent was to artificially influence prices through false signals.
This CFTC action runs parallel to a criminal case brought by the Department of Justice. Zhao previously pleaded guilty to one count of spoofing and was sentenced by the U.S. District Court for the Northern District of Illinois on February 4, 2020.
The CFTC acknowledged the assistance of the Department of Justice Fraud Section’s Commodities Fraud Group, the Federal Bureau of Investigation, the Australian Securities and Investments Commission, and the CME in this investigation. CFTC staff members Nicholas Sloey, Allison Sizemore, Jordon Grimm, Christopher Reed, Charles Marvine, and former staff member Laura Brookover were responsible for the case.
Source: CFTC.gov
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