Tower Research Capital LLC, Deferred Prosecution Agreement (DPA)
Court Docket No.: 19-cr-819
Court Assigned: This case is assigned to U.S. District Court for the Southern District of Texas, Bob Casey United States Courthouse, 515 Rusk Avenue, Houston, Texas 77002.
On October 24, 2019, Tower Research Capital LLC (Tower) entered into a deferred prosecution agreement (DPA) and agreed to pay a total criminal monetary amount of $67,493,849 in criminal monetary penalties, criminal disgorgement and victim compensation. The DPA arises from criminal charges related to a commodities fraud scheme involving thousands of episodes of unlawful trading activity in U.S. commodities markets by three former traders.
According to court documents filed as part of the DPA, from approximately March 2012 until December 2013, three traders who were members of a single trading team at Tower engaged in a scheme to defraud other participants in the markets for E-Mini S&P 500 futures contracts and E-Mini NASDAQ 100 futures contracts traded on the Chicago Mercantile Exchange (CME), and E-Mini Dow futures contracts traded on the Chicago Board of Trade (CBOT) (collectively, E-Mini futures contracts). On thousands of occasions throughout this period, the traders fraudulently placed orders to buy and sell E-Mini futures contracts with the intent to cancel those orders before execution, including in an attempt to profit by deceiving other market participants. By placing these orders, the traders intended to, and did, inject false and misleading information about the genuine supply and demand for E-Mini futures contracts into the markets, and to deceive other participants in those markets into believing something untrue, namely that the visible order book accurately reflected market-based forces of 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 E-Mini futures contracts at quantities, prices and times that they otherwise likely would not have traded.
Under the terms of the DPA, Tower has agreed to, among other things, conduct appropriate reviews of its internal controls, policies and procedures and to modify its compliance program, where necessary, to ensure that it maintains an effective compliance program designed to deter and detect violations of the Commodity Exchange Act and commodities fraud statute.
A number of significant factors contributed to the Department’s criminal resolution with Tower, such as the company’s cooperation with the United States and Tower’s extensive remedial efforts, including swiftly moving in early 2014 to terminate the three traders, making significant investments in sophisticated trade surveillance tools, increasing legal and compliance resources, revising the company’s corporate governance structures and changing its senior management.
The three traders are Kamaldeep Gandhi, 37, and Krishna Mohan, 34, both of New York, New York, and Yuchun (Bruce) Mao, 40, a citizen of the People’s Republic of China. As part of the investigation, the Department obtained an indictment against Mao in October 2018, and those charges remain pending in the Southern District of Texas. See United States v. Yuchun (“Bruce”) Mao, 18-cr-606 (S.D. Tex.). An indictment is merely an allegation and all defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law. In addition, on November 6, 2018, Mohan pleaded guilty to one count of conspiracy to engage in wire fraud, commodities fraud and spoofing, and his sentencing is scheduled for February 13, 2020 before U.S. District Judge Gray H. Miller of the Southern District of Texas. See United States v. Krishna Mohan, 18-cr-610 (S.D. Tex.). On November 2, 2018, Gandhi pleaded guilty to two counts of conspiracy to engage in wire fraud, commodities fraud and spoofing, and his sentencing is scheduled for February 7, 2020 before U.S. District Judge Ewing Werlein Jr. of the Southern District of Texas. See United States v. Kamaldeep Gandhi, 18-cr-609 (S.D. Tex.).
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 dispersed. Please complete the below Victim Impact Statement with the requisite information to submit your claim.
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