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First market spoofing conviction


New Jersey residents who invest in the commodities market may be interested in learning that on Nov. 3, a man was convicted of spoofing, a form of commodities fraud. This was the first instance of this illegal practice to be prosecuted.

"Spoofing" is a term that describes manipulating the stock market to fool other traders into thinking there is a high demand for the commodity. The convicted man owned a firm with less than 10 employees, but according to an executive of an advocacy group for high-frequency traders, he put in more large orders than anyone else in the world with no intention of executing them. In this way, he was able to increase his money on trades that were much smaller. During the course of three months in 2011, he illegally made $1.4 million by spoofing.

The U.S. Attorney for the Northern District of Illinois said that the trader caused a disruption in the markets that put legitimate traders and investors at a disadvantage, while benefiting himself. The man defended himself on the stand and denied any wrongdoing. He said he had every intention of trading all the orders that he entered. He was convicted of six counts of spoofing and six counts of commodities fraud, each carrying long maximum prison terms and large fines. His lawyer said he will pursue every legal option available to him.

A person who has been charged with fraud or another similar white-collar crime may want to retain the services of a criminal defense attorney as soon as possible. There are a few strategies that legal counsel can employ, depending on the nature of the case, including the negotiation of an agreement with the prosecutor that would provide for reduced penalties in exchange for a guilty plea to a lesser offense.

Source: Reuters, "UPDATE 3-High-frequency trader convicted in first U.S. spoofing case", Tom Polansek, Nov 3, 2015

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