September 16, 2019

Remarks of Director of Enforcement James McDonald During CFTC-DOJ Press Conference Call

This morning, the CFTC announced the filing of manipulation and spoofing charges against three individuals who served as executives and traders on the same trading desk of a major U.S. financial institution.  Michael Nowak and Gregg Smith are charged with manipulative conduct and spoofing in the precious metals futures markets in a complaint filed in the United States District Court for the Northern District of Illinois, and Christian Trunz resolved charges of spoofing in an administrative settlement, in which he admitted to the misconduct and agreed to serve as a cooperating witness in this investigation.

We allege that the charged scheme went unchecked for eight years, involved thousands of manipulative acts in the gold, silver, platinum, and palladium futures markets, included multiple individuals across the trading desk and went up the supervisory chain—including to the bank’s Global Head of precious metals trading.

The charges announced today strike at the core of our agency’s mission:  to preserve market integrity and to protect those who participate in our markets from fraud and manipulation.  Well-functioning commodity and derivatives markets should work for all Americans—these markets ensure the stability in prices that customers have come to expect, and the economic growth Americans enjoy. 

But these markets will not work if participants lack confidence in their integrity. That is why we at the CFTC have redoubled our efforts to detect, investigate, and prosecute misconduct that undermines market integrity, like that alleged here.  We have done this in a variety of ways.

First, we have created a Task Force to target this sort of misconduct.  Our Spoofing Task Force serves as a coordinated effort across the Division of Enforcement—with members in each of our offices—to root out manipulation and spoofing from our markets.  The cases filed today are brought by members of the Task Force based in our New York office.  I am grateful for their hard work.

Second, we have enhanced our ability to detect misconduct through the use of data analysis.  This has been a multi-year project, through which we have developed an ability to identify, in the trading data, forms of misconduct in ways that complement our understanding of the activity through our other enforcement tools.  Going forward, we will continue to invest in our data analysis capabilities, in an effort to maximize our ability to detect, and ultimately deter, misconduct across a range trading activities in our markets.

Third, we have worked to develop our cooperation program for individuals who have committed misconduct, but wish to cooperate with us in our investigations.  This cooperation program has allowed us to hold both entities and individuals accountable for their misconduct while opening valuable new avenues of information that has led to additional prosecutions.  Today’s filings stem, in part, from the fruits of this program.

Finally, we have strengthened our relationship with the Department of Justice and the Federal Bureau of Investigation.  We believe that a robust combination of criminal prosecution and regulatory enforcement is essential to achieving our goals of preserving market integrity and protecting our market participants.  My thanks, in particular, to Assistant Attorney General Brian Benczkowski, Fraud Section Chief Rob Zink, and their team for their continued commitment to building this relationship.