Scotiabank to pay $127.4M to settle charges related “massive” spoofing scheme
Investigates ı By Marivic Cabural Summers
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The Bank of Nova Scotia (operating as Scotiabank) agreed to pay a total of $127.4 million to settle the charges filed against it by the U.S. Commodity Futures Trading Commission (CFTC) and the Department of Justice (DOJ).
Scotiabank is a global banking and financial services firm based in Canada. It is a provisionally registered swap dealer registered with the CFTC.
Allegations against Scotiabank
The CFTC and the DOJ alleged that Scotiabank engaged in manipulative and deceptive conduct such as attempted spoofing in gold and silver futures contracts for more than eight years.
In 2018, the CFTC originally penalized Scotiabank $800,000 for spoofing in the precious metals markets.
The U.S. regulators also alleged that the Canadian banking and financial services firm submitted materially incomplete and false statements during the investigation into the unlawful trading practices of its four traders,
The four traders allegedly manipulated precious metals futures contracts by “injecting false and misleading information…to trick other market participants into reacting to the apparent change and imbalance in supply and demand...” for the benefits of the Bank of Scotia and themselves.
In addition, the CFTC and the DOJ alleged that Scotiabank’s compliance program was systematically flawed due to the fact that it failed to detect or prevent its four traders’ illegal trading practices.
Details of the settlement
The settlement amount included $77.4 million to resolve the spoofing and false statements enforcement action. The amount covers $42 million in penalties for spoofing and attempted manipulation, $17 million in penalties for making false and misleading statements, $6.6 million in restitution, and $11.8 million in disgorgement and for retaining an independent monitor.
Of the amount, $60.4 million is for settling the parallel criminal charges filed by the DOJ. Scotiabank entered into a Deferred Prosecution Agreement (DPA) with the Justice Department.
The settlement amount also included a $50 million civil monetary penalties to resolve the CFTC’s swap dealer compliance, supervision, and false statements enforcement action.
Scotiabank committed a serious offense
In a statement, Division of Swap Dealer and Intermediary Oversight Director Joshua B. Sterling said, “The CFTC will continue to apply rigorous oversight to all registrants, and firms will be referred to enforcement whenever there is a strong indication that our rules may have been broken.”
On the other hand, DOJ Criminal Division, Fraud Section Chief Robert Zink said the DPA” reflects the seriousness of the offense” committed by Scotiabank and the “state of its compliance program.”
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