Tower Research agreed to pay a $67 million penalty and signed onto a deferred prosecution

agreement with the Justice Department.

The article which I decided to review from Wall Street Journal is about the Tower Research. In
this article the High-speed trading firm Tower Research Capital LLC agreed to pay $67 million
to resolve regulatory charges that its traders manipulated the stock index futures price, the high-
est penalty ever levied in such a case by the U.S. derivatives watchdog.
This New York tower is considered among the top and most active participants as far as the eq-
uity and derivative is concerned. The major corporate issue arises when they signed the deferred
prosecution agreement with the Justice Department. The Justice Department also works closely
with the Commodity Future Trading Commission, the basic purpose of which is to ensure the
smooth and pure trading of future derivatives and options.
So the condition of which they are accused or alleged is referred as ‘Spoofing’ which basically
means to give a false impression of demand and supply and the fake bids and offers push the
prices in the direction of the Spoofer’s other orders.
Over the last year, the CFTC has filed or dismissed more than a dozen allegations of spoofing,
with the Department of Justice also investigating dozens of those dealers on felony charges.
Moving forward in the article the writer also states the settlement followed the culpable
confession by two ex Tower traders who had been involved in the scam. Kamaldeep Gandhi and
Krishna Mohan pleaded guilty to conspiring to participate in wire theft, asset trafficking and
spoofing, while a grand jury convicted on similar charges a third businessman, Chinese citizen
Yuchun "Bruce" Mao.
The scam allegedly occurred in 2012 and 2013 when the traders, all part of the same team, put
thousands of false orders in E-mini S&P 500 futures, a heavily traded contract which tracks the
S&P 500 stock market index and is often used by investors to hedge against significant market
movements. This is considered as the fabrication of facts and false advertisement in the corporate
sector. In accordance with the prosecutors the three traders fabricated the future contracts
majorly related with the Nasdaq-100 and Dow Jones Industrial Average.
In recent years, prosecutors and the CFTC have cracked down on spoofing, arguing that the
bluffing tactics are a form of fraud. In the Dodd-Frank Act of 2010 Congress banned spoofing.
"Traders at Tower Research Capital LLC have fraudulently put thousands of false orders they
never planned to execute—to cheat other market players to manipulate the market to their own
benefit," said Assistant Attorney General Brian A. Benczkowski of the financial division of the
Justice Department.
Shortly, Tower's settlement covers restitution of $32 million, disgorgement of fraudulent gains of
$10.5 million and a fine of $24.4 million.

The Department of Justice said it would not sue Tower because the firm strengthened its trade
enforcement and other regulatory activities, overhauled its corporate governance processes and
replaced its senior management. And in the end after all the issues and misinterpretation in the
corporate governance of Tower’s, Mark Gorton, the founder of Capital, officially stepped down
as the company's CEO and became the non-executive chairman. According to the NYSE
website, one of Tower Research's subsidiaries, Latour Trading LLC, is an significant liquidity
supplier on the New York Stock Exchange. Mr. Gorton previously created the music-sharing site
known as LimeWire which was shut down by copyright infringement authorities.

Reference:
https://www.wsj.com/articles/tower-research-to-pay-67-million-to-settle-spoofing-claims-
11573155230