In 2020, the CFTC sent out an alert regarding violations of the Commodity Exchange Act (CEA) connected to spoofing.
The CFTC enforces the Commodity Exchange Act which was put into effect in 1936. The CEA established federal oversight and increased transparency of futures and commodities trading so that they occur on designated exchanges.
The act of “spoofing” is when a trader places an order in a futures market with the intent to cancel it before it can be executed. Spoofers may do so to falsify supply and demand information or convince others to invest in a way that is only beneficial to them.
Spoofing may be punishable with up to 10 years of prison per violation.
Spoofing includes
- Trading schemes in commodities and derivatives markets, and futures contracts, that involve placing a bid and quickly canceling it to benefit others.
- The quick placement or cancellation of a bid at the best offer.
- Orders of a similar size being systematically placed and canceled.
- Schemes meant to artificially alter prices.
Blowing the Whistle on Spoofing
- Individuals may report the violation to the CFTC by filing a Form TCR (Tip, Complaint, Referral). You do not have to be a direct victim of spoofing to report it.
- If you know of any violations of the CEA and have high-quality, original information that can lead to enforcement action of more than $1 million in monetary sanctions, you may be eligible for 10%-30% of the rewards from the CFTC or the SEC Whistleblower Program.
- This program also ensures confidentiality and anti-retaliation protections. Rewards and protection are facilitated under the CEA Whistleblower Reward and Anti-Retaliation Law.
Whistleblowers seeking legal advice may contact Kohn, Kohn & Colapinto for a consultation.
