CME Group Inc. has suspended one of its futures traders for at least 60 days after an investigation found he attempted to manipulate the gold and natural gas futures markets through "spoofing" and is suspected of money laundering in Cyprus.
In a notice Monday, CME -- which owns and operates the Chicago Mercantile Exchange, the New York Mercantile Exchange and other markets -- said Andrey Sakharov has been denied access to all of its markets, and it prohibited trades and the placing of orders from any accounts he owns or controls.
According to CME, an investigation by the company's market regulation department found that on multiple dates beginning on July 1, Sakharov entered orders on its electronic trading platform, Globex, that he did not intend to trade at the time the orders were entered.
"Specifically, Sakharov, while trading an account held in another's name and without an executed power of attorney, repeatedly placed single orders for small quantities on one side of the August 2016 gold and natural gas futures markets, followed by single orders for large quantities on the opposite side of these markets," CME said. "Generally, less than 100 milliseconds thereafter, the small-quantity orders traded and the large-quantity orders were canceled."
The investigation also found that Sakharov entered trades for at least four other accounts held in other people's names. CME said Sakharov "informed the firm that introduced these accounts to the clearing member firm that while he wanted to have individual access to these accounts, as well as future accounts he planned on opening with the firm, he did not want to be officially associated with the accounts since he was concerned that he may be banned from trading following this investigation."
CME said the introducing firm told investigators that the account where Sakharov performed his gold and natural gas futures trades has been reported to the Cyprus Securities and Exchange Commission for alleged money laundering. The introducing firm and the clearing member firm were not disclosed.
Sakharov will be denied access through Oct. 21, unless the chief regulatory officer or his delegate extends the ban for an additional period of time, CME said.
Last month, in the first federal prosecution of its kind, a judge in U.S. District Court for the Northern District of Illinois sentenced a high-frequency trader to three years in prison. Michael Coscia placed orders through CME and London-based ICE Futures Europe as part of a $1.4 million fraud scheme to disrupt commodity futures prices.
The Commodity Futures Trading Commission levied a $2.8 million fine against Coscia and Panther Energy Trading LLC for spoofing in July 2013 and banned them from trading for one year (see Daily GPI, July 23, 2013).
Spoofing is an illegal practice where traders generate profits by using a computer algorithm to place bids and offers in futures contracts, but they are quickly cancelled before their execution.