New York, NY – The Commodity Futures Trading Commission (CFTC) has filed a civil enforcement action against John Patrick Gorman III, a swaps trader, alleging he manipulated the price of an interest rate swap to benefit his bank at the expense of a bond issuer. The case was filed in the U.S. District Court for the Southern District of New York on February 1, 2021.
According to the CFTC complaint, the manipulation occurred on February 3, 2015. Gorman, then based in Japan, intentionally traded to depress the price of 10-year U.S. dollar interest rate swap spreads on a swap execution facility (SEF). This was done during the pricing of a bond and related swap, making the deal more profitable for the bank. Gorman allegedly concealed his trading activity from the bond issuer during a pricing call.
The CFTC alleges Gorman communicated his manipulative intent via text messages to colleagues, stating he prioritized moving the price on the screen quickly. He reportedly texted a supervisor he would “get the print at” a lower level, referring to manipulating the displayed price. The agency claims Gorman used a U.S.-based broker through the SEF, a practice he didn’t typically employ, specifically to influence the screen price.
The complaint further alleges Gorman attempted to cover up his actions during the CFTC investigation. After being requested to preserve messages on his personal phone, Gorman allegedly deleted relevant WhatsApp messages and falsely claimed compliance with the preservation request, both in a letter from his counsel and under oath during investigative testimony.
The CFTC is seeking civil monetary penalties, disgorgement of ill-gotten gains, restitution, trading bans, and a permanent injunction against future violations of federal commodities laws. The agency also 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 listed in the agency’s release.
Source: CFTC.gov
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