NEW YORK (Reuters) - Tower Research Capital LLC has agreed to pay nearly $67.5 million to the U.S. Commodities Futures Trading Commission to settle charges that it and three former traders manipulated U.S. futures markets.
The proprietary trading firm agreed to pay to resolve charges through a deferred prosecution agreement with the Justice Department to resolve charges the company and three former traders engaged in unlawful activity while placing orders that benefited Tower and prompted $32.6 million in market losses, according to statements from U.S. authorities.
The total to be paid includes about $43.1 million in restitution and disgorgement and a $24.4 million civil monetary penalty, the largest total monetary relief ever ordered in a spoofing case, the CFTC said its statement.
This is the latest in a surge of U.S. actions on spoofing, a practice in which traders place orders they intend to cancel to move prices to benefit their market positions.
“Free markets are not open and fair when people criminally manipulate them,” U.S. Attorney Ryan Patrick of the Southern District of Texas said in a separate Justice Department statement.
The three traders - New Yorkers Kamaldeep Gandhi and Krishna Mohan and Chinese citizen Yuchun (Bruce) Mao - engaged in a scheme to defraud other market participants from about March 2012 to December 2013. The traders fraudulently placed orders to buy and sell equity index futures contracts with plans to cancel before execution, authorities said.
Gandhi pleaded guilty to two counts of conspiracy to engage in wire fraud, commodities fraud and spoofing in 2018. Mohan pleaded guilty to one count of conspiracy to engage in wire fraud, commodities fraud and spoofing, also in 2018. Both are scheduled for sentencing in February 2020.
Lawyers for both did not respond immediately to requests for comment. The third trader could not be reached for comment.
“Tower is deeply disappointed by the conduct of the three former employees named in this case, each of whom left the firm nearly six years ago,” a spokesman said in an emailed statement, noting the company has cooperated with investigators.
The firm has agreed to review its internal controls, policies and procedures as part of the agreement, the Justice Department said.
Reporting by Chris Prentice; editing by Jonathan Oatis