The series of lawsuits mark the growing trend of the Justice Department holding individuals accountable for their roles in corporate wrongdoings.
The U.S. Justice Department along with the Commodity Futures Trading Commission (CFTC) have filed a civil and criminal lawsuits against three European banks, which have paid $46.6 million to settle the cases, as well as eight individuals for alleged manipulation in the U.S. futures and commodities market.
HSBC, UBS, Deutsche Bank and as well as former traders at the banks and individuals at other firms, have been charged into “spoofing” the equity futures and the commodity market following a large-scale multi-agency probe.
The lawsuits marks the first time the CFTC has joined hands with the U.S. Justice Department and the FBI to criminal and civil charges against multiple companies and individuals, underlining the their increased focus on making individuals accountable for corporate wrongdoing.
The 2010 Dodd-Frank Financial Reform Act made spoofing a criminal offense.
Spoofing involves placing bids to buy or sell futures contracts with the intent to cancel them before execution them, thus creating an illusion of demand. Spoofers influence prices to benefit their market positions.
The CFTC said, UBS and Deutsche Bank have agreed to pay $15 million and $30 million, respectively to settle the civil charges in the case; HSBC has agreed to pay $1.6 million.
The three banks have reduced their fines by assisting the CFTC in the investigations, which dates back as far as 2008.
Incidentally, UBS self-reported the alleged misconduct by its traders to the regulator, said CFTC.
A spokesman for UBS did not immediately provide comment.
A spokesman for HSBC said the bank was pleased to have resolved the matter.
As per Deutsche Bank’s spokesman, the bank “has provided substantial and proactive cooperation with the government’s investigation and has enhanced controls and surveillance to help ensure that the underlying conduct does not occur in the future.”
“Spoofing is a particularly pernicious example of bad actors seeking to manipulate the market through the abuse of technology,” said James McDonald, CFTC’s head of enforcement, in a statement. “These cases should send a strong signal that we at the CFTC are committed to identifying individuals responsible for unlawful activity and holding them accountable.”
As per 3 people with knowledge of the matter, many of the individuals charged were former employees of the three banks.
In its statement the Justice Department said, it has charged James Vorley from the UK, Cedric Chanu from France, Jiongsheng Zhao from Australia and Krishna Mohan, a resident of New York, with fraud and spoofing offenses.
Edward Bases and John Pacilio, from Connecticut, have also been charged with fraud in connection with an alleged scheme to engage in both solo and coordinated spoofing.
Andre Flotron, from Switzerland living in New Jersey, has been charged with conspiracy to commit spoofing and fraud when he was a UBS AG precious metals trader in Switzerland.
Jitesh Thakkar of Illinois has been charged with developing a software for the use by his co-conspirator to engage in spoofing, said the Justice Department.
While Bases, Pacilio, Mohan and Thakkar were arrested by U.S. law enforcement, Zhao was arrested by Australian authorities.
Vorley, Chanu, Zhao and Mohan could not be reached for comment.
Bases, Pacilio and Thakkar did not immediately respond to a request for comment.
”The cases against Mr. Flotron are misguided and have no merit. We will take the cases to trial and he will be exonerated,” said Flotron’s legal counsel in a statement.