CFTC Charges Trader with Manipulation of Interest Rate Swap Spreads

The CFTC charged a swaps trader with manipulating the prices of interest rate swap spreads and attempting to cover up the misconduct.

As alleged in the CFTC Complaint filed in the U.S. District Court for the Southern District of New York, the trader actively sold swap spreads with the intent of depressing the prices to the disadvantage of a bond issuer that was to enter into a large swap with the trader's employer bank in connection with a bond offering. Further, the CFTC alleged that the trader attempted to cover up the misconduct by (i) deleting communications covered by a CFTC-issued preservation request and (ii) falsely stating compliance with the preservation request in a letter and in investigative testimony under oath.

The CFTC alleged that the trader violated CEA Sections 6(c)(1)-(3) ("Manipulation and False Information") and 9(a)(2) ("Commodity Price Manipulation"), as well as CFTC Rules 180.1 ("Prohibition on the Employment, or Attempted Employment, of Manipulative and Deceptive Devices") and 180.2 ("Prohibition on Price Manipulation").

The CFTC is seeking, among other things, a permanent injunction, civil monetary penalties, disgorgement and full restitution.