Whistleblowers who assisted the U.S. government in prosecuting a scheme within Deutsche Bank to manipulate the price of precious metals futures contracts are entitled to share in a $30 million penalty the German bank has agreed to pay.
The Commodity Futures Trading Commission (CFTC) said that certain Deutsche Bank precious metals traders engaged in a scheme to manipulate the price of precious metals futures by spoofing—an illegal and deceptive trading practice of “bidding or offering with intent to cancel before execution,” according to the Dodd-Frank Act.
According to the CFTC, the Deutsche Bank traders engaged in the spoofing scheme from at least February 2008 and continued through at least September 2014.
The Deutsche Bank traders placed large bids or offers in the precious metals futures market with the intent to cancel before execution (spoof order) after another smaller bid or offer (resting order) was placed on the opposite side of the same market.
The CFTC alleged the Deutsche Bank traders placed their spoof orders with the intent to create the false appearance of market depth, which they knew would in turn create the impression of greater buying or selling interest than would have existed otherwise. These deceptive practices at times successfully altered the price of precious metals futures, the CFTC said.
Deutsche Bank Securities Inc. failed to perform its supervisory duties when its own electronic surveillance system identified instances of potential misconduct that the bank neglected to follow up on in the vast majority of cases, the CFTC alleged.
In addition to the $30 million penalty, Deutsche Bank agreed to take specific measures to detect and bar its employees from engaging in illegal trading practices in the future. Because Deutsche Bank cooperated with federal regulators and took remedial steps proactively, the CFTC reduced the penalties substantially.
Whistleblowers who knew of the spoofing scheme in Deutsche Bank and voluntarily provided the CFTC with original information that led to the $30 million penalty and remedial measures are eligible to claim a whistleblower award.