CFTC Won't Prosecute Ex-Citigroup Traders Over 'Spoofing' -- Update

By Gabriel T. Rubin Features Dow Jones Newswires

Three former Citigroup Inc. traders struck nonprosecution agreements with the Commodity Futures Trading Commission thanks to their cooperation in a larger investigation of "spoofing" in U.S. Treasury markets, the CFTC said Thursday.

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Jeremy Lao, Daniel Liao and Shlomo Salant admitted to engaging in market manipulation in 2011 and 2012, but the agency said it decided to shield them from prosecution because of their "substantial cooperation" and lack of a history of misconduct.

The CFTC fined Citigroup $25 million in January for failing to properly supervise its traders and prevent spoofing. Citigroup neither admitted to nor denied the allegations.

The regulator issued new advisories for nonprosecution agreements at the end of the Obama administration. The guidance -- which the CFTC announced Jan. 19, the same day as the Citigroup settlement -- was intended to clarify when and what type of cooperation from individuals and companies would be rewarded. Thursday's agreements are the first use of the new guidance by the commission.

James McDonald, the CFTC's new enforcement director, signaled that nonprosecution agreements would be a key part of his enforcement strategy going forward.

"Nonprosecution agreements like these give the division a powerful tool to reward extraordinary cooperation in the right cases, while providing individuals and organizations strong incentives to promptly accept responsibility for their wrongdoing and cooperate with the division's investigation," he said in a statement.

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Spoofing involves a trader entering large orders with the intention of tricking others into thinking there had been a fundamental change in the supply and demand of an asset. Congress outlawed the practice in 2010.

Write to Gabriel T. Rubin at gabriel.rubin@wsj.com

(END) Dow Jones Newswires

June 29, 2017 15:49 ET (19:49 GMT)