CHICAGO, IL – Jiongsheng Zhao, a resident of Australia, has been charged with spoofing and market manipulation in a federal court complaint filed by the Commodity Futures Trading Commission (CFTC) in the U.S. District Court for the Northern District of Illinois on January 29, 2018.
The CFTC alleges that from July 2012 through March 2017, Zhao engaged in a manipulative scheme involving the E-mini S&P 500 futures contracts traded on the Chicago Mercantile Exchange (CME). The core of the scheme involved “spoofing” – placing orders with no intention of executing them, but rather to create a false impression of supply or demand.
According to the complaint, Zhao would place an initial order he desired to fill, then immediately enter a larger, offsetting order that he planned to cancel before it could be executed. This tactic was reportedly employed approximately 2,300 times, encompassing 3,100 separate instances of spoofing. The intent was to mislead other market participants, prompting them to react to the false signals and execute trades against Zhao’s original, legitimate order, allowing him to benefit financially.
“By injecting false information into our markets, spoofers gain an unfair advantage over law-abiding market participants, thereby hindering competition and undermining the integrity of our markets,” stated James McDonald, Director of Enforcement for the CFTC. “That’s why the CFTC is committed to identifying this type of misconduct and holding the responsible individuals accountable.”
The CFTC is seeking civil monetary penalties, disgorgement of any ill-gotten gains, a ban on trading and registration, and a permanent injunction preventing Zhao from future violations of federal commodities laws. The agency received assistance in this matter from the U.S. Department of Justice, the Federal Bureau of Investigation, the CME, and the Australian Securities & Investments Commission.
Source: CFTC.gov
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