Futures Trader Banned After Pleading Guilty to 'Spoofing' -- Update

By Dave Michaels and Alexander OsipovichFeaturesDow Jones Newswires

A former futures trader at Deutsche Bank AG was permanently barred from the industry after admitting he conspired to manipulate the price of gold and silver futures contracts.

David Liew, a trader who was based in Singapore, also pleaded guilty in federal criminal court in Illinois on Thursday to using illegal spoofing techniques from 2009 to 2012. Regulators and prosecutors have cracked down on spoofing, which involves sending fake offers intended to push prices in a direction that benefits the trader's other orders. Congress made it illegal through the 2010 Dodd Frank financial overhaul law.

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Mr. Liew manually placed hundreds of orders on an electronic trading platform operated by CME Group Inc. that were intended to trick other market participants into altering their prices, according to a plea agreement in his criminal case. Mr. Liew coordinated with other traders at his bank and was taught by other metals traders at the bank how to spoof, according to court documents.

Mr. Liew carried out his trades on CME's Comex division, a major venue for precious-metals futures trading. In May, an average of about 289,000 of the flagship Comex gold futures contracts and 87,000 of the main Comex silver contracts changed hands each day, according to data on CME's website.

According to one chat cited by the Commodity Futures Trading Commission, Mr. Liew told a trader at another bank that he "sold out...by just having fake bids." The CFTC said in its order that Mr. Liew pushed silver prices down to benefit the other trader's positions.

In another instance, the same trader asked Mr. Liew, "yo, can u help me push silver down?" Mr. Liew then helped accomplish that, triggering other customers' "stop loss" orders that are filled only when a price moves a predetermined percentage. Mr. Liew then bought back silver contracts at the lower price, cutting his exposure and generating a profit, the CFTC's order said.

A lawyer for Mr. Liew didn't immediately respond to a request for comment.

Neither court documents nor the CFTC's order identified Mr. Liew's employer, but people familiar with the matter said he worked for Deutsche Bank in Singapore.

The Wall Street Journal reported in 2015 that U.S. officials were investigating at least 10 major banks for possible rigging of precious-metals markets.

Mr. Liew was a junior trader who joined his employer in 2009 after earning his undergraduate degree. He started at the bank in its global analyst program and was later assigned to the metals trading desk.

The criminal charges to which Mr. Liew pleaded guilty this week carry a maximum sentence of five years in prison and a fine of $250,000, according to court documents.

The CFTC regulates futures trading in the U.S. and reached an agreement with Mr. Liew to ban him from trading commodities or futures. The CFTC's order didn't impose a fine on Mr. Liew because he cooperated with its investigation, indicating his information could be beneficial to regulators and prosecutors if they pursue other traders involved in the scheme.

Write to Dave Michaels at dave.michaels@wsj.com and Alexander Osipovich at alexander.osipovich@dowjones.com

(END) Dow Jones Newswires

June 02, 2017 15:20 ET (19:20 GMT)