John Patrick Gorman III, a swaps trader formerly with a global investment bank, has been charged with swap manipulation and making false statements to regulators, the Commodity Futures Trading Commission (CFTC) announced on February 1, 2021. The civil enforcement action was filed in the U.S. District Court for the Southern District of New York.
The CFTC alleges that on February 3, 2015, Gorman, while located in Japan, engaged in a scheme to manipulate the price of an interest rate swap between a bond issuer and his bank. He is accused of selling 10-year swap spreads to artificially lower the price displayed on a swap execution facility (SEF) screen, benefiting the bank at the expense of the bond issuer. Gorman allegedly did not disclose his trading activity during a pricing call with the issuer.
Evidence presented by the CFTC includes text messages sent from Gorman’s personal phone, revealing his intent to manipulate the market. Prior to the pricing, he texted a colleague that he was utilizing a SEF broker specifically to “move the screen the quickest.” He also informed his supervisor he would “get the print at” a lower level, referring to manipulating the displayed price.
The complaint further alleges that Gorman attempted to cover up his actions when the CFTC requested preservation of messages on his phone. He allegedly deleted relevant WhatsApp messages and falsely claimed compliance with the preservation request, both in a letter through counsel and during sworn investigative testimony.
The CFTC is seeking civil monetary penalties, disgorgement of ill-gotten gains, restitution, a trading ban, and a permanent injunction against future violations of federal commodities laws. The agency acknowledged assistance from the United Kingdom Financial Conduct Authority in the investigation. The case is being pursued by CFTC staff including Gabriella Geanuleas, Devin Cain, James Wheaton, and others.
Source: CFTC.gov
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