Release Number 8395-21

Federal Court Sanctions Australian Trader for Spoofing and Engaging in a Manipulative and Deceptive Scheme

June 11, 2021

—  The Commodity Futures Trading Commission today announced that the U.S. District Court for the Northern District of Illinois entered a consent order on June 4, resolving CFTC charges that Jiongsheng Zhao, a trader based in Australia, engaged in spoofing and manipulation in the Chicago Mercantile Exchange E-mini S&P 500 futures market in violation of the Commodity Exchange Act (CEA) and CFTC regulations.

The order prohibits Zhao from trading in commodity interests for five years, imposes $21,000 in disgorgement, and requires Zhao to cease and desist from violating the CEA’s prohibitions on spoofing and manipulation. This case was brought in connection with the Division of Enforcement’s Spoofing Task Force.

The consent order resolves the CFTC’s complaint filed against Zhao on January 28, 2018. [See CFTC Press Release No. 7688-18] On January 21, 2020, the CFTC resolved charges against Propex Derivatives Pty Ltd., a proprietary trading firm headquartered in Australia, in connection with Zhao’s spoofing. [See CFTC Press Release No. 8105-20]

Case Background

The order finds that from at least July 2012 through at least March 2017, Zhao repeatedly engaged in manipulative or deceptive acts and practices by “spoofing” (bidding or offering with the intent to cancel the bid or offer before execution). On thousands of occasions, Zhao placed an order that he wanted to execute and thereafter entered a larger order on the opposite side of the market that he intended to cancel before execution. In placing these larger spoof orders, Zhao intentionally or recklessly sent false signals of increased supply or demand designed to trick market participants into executing against the orders he wanted filled. 

Parallel Criminal Action

In a separate, parallel criminal action brought by the Department of Justice, Zhao previously pleaded guilty to one count of spoofing and was sentenced on February 4, 2020 by the U.S. District Court for the Northern District of Illinois. 

The Division of Enforcement acknowledges and thanks the staff of the Department of Justice Fraud Section’s Commodities Fraud Group, the Federal Bureau of Investigation, the Australian Securities and Investments Commission, and the CME for their assistance.

The Division of Enforcement staff members responsible for this case are Nicholas Sloey, Allison Sizemore, Jordon Grimm, Christopher Reed, and Charles Marvine, as well as former staff member Laura Brookover.