WASHINGTON (Reuters) - Citigroup Inc on Thursday became the first-ever bank to get hit with civil “spoofing charges,” after U.S. derivatives regulators said one of its units entered U.S. Treasury futures market orders with the intent of canceling them.
The Commodity Futures Trading Commission said that Citigroup will settle the case without admitting or denying the charges and pay a $25 million fine.
“We are pleased to have resolved this matter,” Citigroup spokeswoman Danielle Romero-Apsilos said in a statement.
The CFTC first won new powers to go after manipulative “spoofing” in the 2010 Dodd-Frank Wall Street reform law.
The term refers to efforts by traders to create a false appearance of market interest in a commodity or other financial instrument by placing orders and then immediately canceling them.
The first person to be charged, both criminally and civilly, with spoofing, was Michael Coscia, a New Jersey-based trader who was accused of making illegal profits through spoofing the markets.
Coscia went to trial and was found guilty by a jury. He was sentenced to three years in prison. He is appealing his conviction.
To date, the most high-profile spoofing case, however, involved Navinder Sarao, a London-based trader whom the Justice Department and CFTC said helped contribute to the May 2010 “flash crash.”
Sarao pleaded guilty last fall to spoofing and wire fraud.
In the CFTC’s civil case against Citigroup, the regulator said five traders at Citigroup Global Markets Inc engaged in spoofing more than 2,500 times in various Treasury futures.
The bank was also charged with failing to supervise its employees and provide adequate training to avoid the violations.
The CFTC said the bank cooperated during the investigation and also self-reported some of the spoofing orders after CME Group inquired about a number of suspicious orders.
Reporting by Sarah N. Lynch; Editing by Chizu Nomiyama and Alan Crosby