A trader who conspired to manipulate futures contracts in precious metals committed those actions while working at Deutsche Bank AG, a person familiar with the matter said, and he is now cooperating with prosecutors.
The trader, David Liew, pleaded guilty to fraud on Thursday in federal court in Chicago for his role in the spoofing of contracts for gold, silver, platinum and palladium, court papers said.
Along with spoofing — placing orders without the intent of executing them in an attempt to manipulate the price — he also acknowledged front-running customers’ orders.
Liew’s cooperation suggests more headaches for Deutsche Bank and its traders.
Liew worked on his own, but also with at least three other traders at the bank to coordinate spoofing hundreds of times, practices he said he learned from his coworkers, court documents said.
Liew’s employer is described as Bank A in the plea agreement and identified as Deutsche Bank by the person familiar with the matter.
Along with the US Department of Justice, the Commodity Futures Trading Commission on Friday settled an enforcement action against Liew, banning him from trading in markets the agency oversees.
Liew’s lawyer Neil MacBride and Deutsche Bank spokesman Troy Gravitt declined to comment.
Deutsche Bank, which was not charged in the spoofing case and whose shares were little changed on Friday, has reached multiple settlements with US regulators on issues including rate-rigging and lax sanctions controls.
It in January agreed to pay US$7.2 billion to the US government over the sale of mortgage securities, while a US Federal Reserve settlement this week over its anti-money laundering lapses required the bank to bring in an outside party to oversee compliance — at least the sixth monitor in recent years.
The bank remains under the justice department’s investigation for its role in trades that allowed wealthy Russians to move about US$10 billion out of the country, though it has settled with bank regulators.
The case against Liew is the first fruit of the federal criminal investigation into whether traders at some of the world’s biggest banks conspired to manipulate prices in precious-metals markets.
Prosecutors have pursued spoofing charges more aggressively since the adoption of the Dodd-Frank financial law, which made the practice illegal, most notably charging a British trader with contributing to the “flash crash” of 2010.
They now have the help of Liew, who was charged in January under seal and is providing the government with information.
Liew joined the bank in July 2009 after receiving his bachelor’s degree as part of the bank’s global analyst program, court documents said.
Later that year, he was installed at the bank’s metals trading desk in the Asia-Pacific region, where he learned how to spoof from experienced metals traders, the documents said.
Liew until February 2012 worked with other traders at the bank to rig precious metals futures by transmitting orders to the Chicago Mercantile Exchange that they never intended to fill, court papers said.
Liew and the conspirators sought to create a false sense of supply or demand to drive the price of precious metals futures contracts up or down, or artificially increase the number of participants willing to transact at the existing price, the plea agreement said.
Liew and his conspirators could profit or mitigate losses by executing their positions before the spoof order, the agreement said.
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