The U.S. Commodity Futures Trading Commission (CFTC) today announced that Judge Amy J. St. Eve of the U.S. District Court for the Northern District of Illinois entered a Consent Order of Permanent Injunction (Order) against Defendants Igor B. Oystacher and his proprietary trading company, 3Red Trading LLC (3Red), both of Chicago, Illinois, finding that the Defendants engaged in a manipulative and deceptive spoofing scheme while trading at least five different futures contracts on four exchanges for more than two years, which violated certain provisions of the Commodity Exchange Act (CEA) and CFTC Regulations adopted pursuant to the CFTC’s anti-spoofing and expanded anti-fraud and anti-manipulation authority under the Dodd-Frank Act.
The Court’s Order stems from a CFTC Complaint filed on October 19, 2015, charging Oystacher and 3Red with spoofing and employment of a manipulative and deceptive device while trading E-Mini S&P 500, Copper, Crude Oil, Natural Gas, and VIX futures contracts.
Sanctions Ordered, Including Monitoring of Defendants’ Trading
The Order requires Oystacher and 3Red to pay, jointly and severally, a $2.5 million civil monetary penalty. The Order also requires that an independent monitor assess and monitor for three years all 3Red’s and Oystacher’s futures trading for the purpose of identifying any future violations of the CEA and CFTC Regulations, as charged.
The Order also requires Oystacher and 3Red to employ certain compliance tools with respect to all of Oystacher’s futures trading on U.S. exchanges for a period of 18 months. The Order further permanently prohibits Oystacher and 3Red from spoofing and employment of manipulative or deceptive devices while trading futures contracts, including entering bids or offers with the intent to cancel the bids or offers before execution.
CFTC Director of Enforcement Comments
Aitan Goelman, the CFTC’s Director of Enforcement, commented:
This Order sends a strong message to the financial markets that the CFTC will aggressively investigate, prosecute, and penalize spoofing and manipulative conduct, whenever they occur.
Specifically, the Order finds that Oystacher and 3Red intentionally and repeatedly engaged in a manipulative and deceptive spoofing scheme while trading the spot-month contracts in the E-Mini S&P 500 futures contracts on the Chicago Mercantile Exchange (CME); crude oil and natural gas futures contracts on the New York Mercantile Exchange (NYMEX); copper futures contracts on the Commodity Exchange Inc. (COMEX); and the volatility index (VIX) futures contract on the CBOE Futures Exchange (CFE) on at least 51 trading days between December 2011 and January 2014.
The Order further finds that Oystacher and 3Red engaged in this scheme by manually placing passive displayed orders at or near the best price on one side of the market behind existing orders in such size or number that it created a false or misleading impression of market depth and then subsequently cancelling those orders simultaneously or nearly simultaneously with the entry of an order at the same or better price on the opposite side of the market.
According to the Order, this strategy allowed Oystacher and 3Red to buy or sell futures contracts in quantities and/or at price levels that would not have otherwise been available to them in the market, absent the spoofing conduct.
To view the Consent Order from the CFTC click here.