The U.S. Commodity Futures Trading Commission (CFTC) announced settlements with three firms – Morgan Stanley Capital Group Inc., Belvedere Trading LLC, and Mitsubishi International Corporation – for engaging in spoofing, a form of market manipulation. The actions, filed and settled on September 30, 2019, stem from investigations conducted by the CFTC’s Spoofing Task Force.
Spoofing involves placing bids or offers with the intent to cancel them before execution, creating a false impression of market activity and potentially manipulating prices. The CFTC considers such practices a violation of the Commodity Exchange Act (CEA).
Mitsubishi International Corporation was charged with multiple instances of spoofing in silver and gold futures markets on the Commodity Exchange, Inc. between April 2016 and January 2018. The firm, acting through a trader in its London affiliate office, will pay a $400,000 civil penalty and is required to cease and desist from further violations of the CEA’s spoofing prohibition.
Belvedere Trading LLC, a Chicago-based proprietary trading firm, was found to have engaged in spoofing on hundreds of occasions in the CME E-mini S&P 500 futures market between June 2014 and February 2015, and again in October and November 2015. Two of its traders were implicated in the scheme. Belvedere will pay a $1.1 million penalty and is also subject to a cease and desist order. The CFTC noted that Belvedere’s early resolution of the matter contributed to a reduced penalty.
Morgan Stanley Capital Group Inc. was charged with spoofing in precious metals futures markets from November 2013 to November 2014. The firm will pay a $1.5 million civil monetary penalty, cease and desist from violating the spoofing prohibition, and implement improved training, systems, and controls to prevent future occurrences. The CFTC acknowledged Morgan Stanley’s significant cooperation with the investigation, which led to a reduced penalty.
“As these cases demonstrate, the CFTC is committed to preserving the integrity of our markets—like the financial and precious metals futures markets at issue here—and to rooting out unlawful practices like spoofing,” said CFTC Enforcement Director James McDonald. “We will continue to vigilantly investigate and prosecute misconduct by entities that spoof in our markets.”
The CME Group’s Market Regulation Department assisted the CFTC in the Belvedere Trading investigation.
Source: CFTC.gov
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