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Monetary metals market rigger learned how to do it at Deutsche Bank

Section: Documentation

Trader in Spoofing Case May Be Tied to Deutsche Bank

By Tom Schoenberg
Bloomberg News
Friday, June 2, 2017

A trader who admitted Thursday to conspiring to manipulate futures contracts in precious metals committed those actions while working at Deutsche Bank AG, according to a person familiar with the matter.

The trader, David Liew, pleaded guilty in federal court in Chicago to a fraud conspiracy over the spoofing of futures contracts for gold, silver, platinum, and palladium futures, according to court papers. Along with spoofing -- which is placing orders without the intent of executing them in an attempt to manipulate the price -- he acknowledged front-running customers' orders.

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The matter indicates more potential trouble for Deutsche Bank as it attempts to shake the financial and reputational drag of more than a half-dozen settlements in recent years with U.S. authorities over wrongdoing. The documents state that Liew worked on his own but also with at least three other traders at the bank hundreds of times in coordinated spoofing. Liew admitted that he learned spoofing practices from others at Deutsche Bank. Because Liew is cooperating with the investigation, prosecutors examining the metals market could take action against other traders at Deutsche Bank. ...

The case against Liew also provides the deepest insights yet into a federal criminal investigation of whether traders at some of the world's biggest banks conspired to manipulate prices in precious-metals markets. Liew's cooperation, and allegations that he conspired with a trader at another global bank, suggests that prosecutors continue to press forward with the probe. ...

Liew joined the bank in July 2009 after receiving his bachelor's degree as part of the bank's global analyst program, according to the court documents. Later that year he was installed at the bank's metals trading desk in the Asia-Pacific region.

Until February 2012 Liew worked with other traders at the bank to rig precious metals futures by transmitting orders to the Chicago Mercantile Exchange that they never intended to fill, according to the court papers.

Liew and the conspirators sought to create a false sense of supply or demand in order to cause other market participants to react and drive the price of precious metals futures contracts down or up or artificially increase the number of participants willing to transact at the existing price, according to the plea agreement. Liew and his conspirators could profit or mitigate losses by executing their positions before the spoof order, the agreement states.

On one occasion, Liew and his colleagues initiated transactions after getting information about a large metals trade to be executed for a customer of the bank "in an effort to benefit improperly from the anticipated movement in price that would result from the execution of the customer's trade," according to the court filing.

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