The Bank of Nova Scotia, Deferred Prosecution Agreement (DPA)
Court Docket No.: 3:20-CR-00707-MAS
Court Assigned: This case is assigned to U.S. District Court for the District of New Jersey, Clarkson S. Fisher Building & U.S. Courthouse, 402 East State Street Room 2020, Trenton, NJ 08608.
On August 19, 2020, The Bank of Nova Scotia (Scotiabank) entered into a deferred prosecution agreement (DPA) with the Department of Justice and agreed to pay $60,451,102 in criminal monetary penalties, criminal disgorgement and victim compensation. The DPA arises from criminal charges related to a price manipulation and fraud scheme involving thousands of episodes of unlawful trading activity in U.S. commodities markets by four former traders.
According to court documents filed as part of the DPA, from approximately January 2008 until July 2016, four metals traders employed by Scotiabank, including Corey Flaum, engaged in fraudulent and manipulative trading practices in the markets for gold, silver, platinum, and palladium futures contracts (collectively, precious metals futures contracts) that traded on the New York Mercantile Exchange Inc. (NYMEX) and Commodity Exchange Inc. (COMEX), which are commodities exchanges operated by the CME Group, Inc. On thousands of occasions throughout this period, the traders placed orders to buy and sell precious metals futures contracts with the intent to cancel those orders before execution. By placing these orders, the traders intended to artificially move the prices of precious metals futures contracts in a direction that was favorable to them and Scotiabank, and to inject false and misleading information into the precious metals futures markets in order to deceive other market participants into believing something untrue, namely that the market reflected legitimate supply and demand. This false and misleading information was intended to, and at times did, trick other market participants into reacting to the apparent change and imbalance in supply and demand by buying and selling futures contracts at quantities, prices, and times that they otherwise likely would not have traded.
Under the terms of the DPA, the Bank of Nova Scotia has agreed to pay a combined $60,451,102 in a criminal monetary penalty ($42,000,000), criminal disgorgement ($11,828,912), and victim compensation ($6,622,190) with the criminal monetary penalty credited for any payments made to the Commodity Futures Trading Commission (CFTC). Scotiabank has also agreed to, among other things, continue to cooperate with the Department in any ongoing investigations and prosecutions relating to the conduct, including of individuals, to modify its compliance program where necessary and appropriate, and to retain an independent compliance monitor for three years.
On July 25, 2019, Flaum pleaded guilty to one count of attempted price manipulation in connection with his precious metals futures contracts trading at Scotiabank and another financial services firm. His sentencing is scheduled for January 27, 2021 before U.S. District Judge Brian M. Cogan of the Eastern District of New York.
To facilitate the efficient payment of compensation to victims in this matter the Department will serve as the claims administrator and will have sole discretion to determine how the victim compensation amount will be disbursed. Please complete the below Victim Impact Statement with the requisite information to submit your claim.
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Victim Impact Statement: If you would like to submit a Victim Impact Statement you may do so by mailing the Victim Impact Statement below to: Victim Witness Unit, U.S. Department of Justice, Criminal Division, Fraud Section, 10th & Constitution Avenue, NW, Bond Building, Room 4416, Washington, DC 20530. You also may submit the Victim Impact Statement via email at Victimassistance.firstname.lastname@example.org or by fax at: (202) 514-3708.
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